Every business owner eventually asks the same nervous question: "How much do I actually have to sell before I stop losing money?" That number is your break-even point — the exact volume of sales at which your total revenue finally covers your total costs, and profit flips from red to black. This break-even calculator finds that point for you in seconds, using the same formula taught in introductory accounting and finance courses around the world.
Instead of guessing, you get three concrete answers: the contribution margin on each unit you sell, the number of units you must move each month just to cover your bills, and the monthly revenue you need to hit that target. Enter your fixed costs, your selling price, and the variable cost of making one unit, and the result updates instantly.
How to Use
- Enter your Monthly Fixed Costs — the bills that arrive whether you sell anything or not: rent, full-time salaries, software subscriptions, insurance, and loan repayments. Use one month's worth of these recurring costs.
- Set your Price per Unit — what a customer actually pays you for one product, seat, subscription, or service. If you offer discounts, enter the realistic net price rather than the list price.
- Enter your Variable Cost per Unit — everything you spend to make or deliver one more item: raw materials, packaging, shipping, payment processing fees, and the piece-rate labor that scales with volume.
- Read the result card. The Contribution Margin per Unit shows how much each sale chips away at your fixed costs. The highlighted Break-Even Point (Units) tells you how many units you must sell, and Break-Even Revenue restates that goal in dollars.
- Stress-test the result: raise the variable cost to model a supply-price spike, or lower the price to simulate a promotion. The break-even point moves immediately, so you can see how fragile or comfortable your margin really is.
The Break-Even Formula
The math rests on a single idea: each unit sold contributes a slice of money toward covering your fixed costs. That slice is the contribution margin:
Contribution Margin = Price per Unit − Variable Cost per Unit
Once you know how much each unit contributes, the break-even point is simply how many slices it takes to cover the whole fixed-cost bill:
Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit
And the revenue version of the same goal is:
Break-Even Revenue = Break-Even Units × Price per Unit
A quick worked example: if your fixed costs run $10,000 per month, you sell each item for $50, and each item costs you $30 to make, the contribution margin is $20 per unit. Dividing $10,000 by $20 gives 500 units — and 500 units × $50 = $25,000 of monthly revenue before you earn your first dollar of profit. Sell 501 units and you are $20 in the black; sell 499 and you are $20 in the red.
A companion ratio is the contribution margin ratio — the margin divided by price, here $20 ÷ $50 = 40%. It is useful because break-even revenue can also be computed directly as fixed costs divided by that ratio, and it lets you compare the profitability of very different products on the same scale.
Fixed vs. Variable Costs
Getting the formula right is easy; getting the inputs right is where most break-even analyses fail.
- Fixed costs stay constant regardless of volume, at least within a normal range. Rent, base salaries, insurance, depreciation, and monthly software fees are classic examples. Note the caveat "within a normal range": if you double production and must lease a second factory, a "fixed" cost jumps — accountants call this a step cost.
- Variable costs rise and fall directly with each unit sold. Materials, packaging, shipping, merchant fees, and commission-only salespeople belong here.
- Semi-variable costs contain a bit of both — for example, a phone bill with a fixed line charge plus overage fees. Split them: put the fixed portion in fixed costs and the per-use portion in variable cost.
Misclassifying costs is the most common error. Tucking a per-unit shipping charge into fixed costs understates your break-even point and gives you false confidence.
Examples
Example 1 — A café turning the corner. Monthly fixed costs (rent, two salaries, utilities, equipment lease) total $10,000. The average drink sells for $5, and beans, cup, lid, and labor cost $3 per drink. Contribution margin is $2, so the café must sell 5,000 drinks per month — about 167 per day, or $25,000 in revenue — before it is profitable. If the owner raises prices to $5.50, the margin rises to $2.50 and the break-even drops to 4,000 drinks.
Example 2 — An online subscription. Fixed costs are $4,000 per month (hosting, ads, founder salary). The subscription price is $20 per month, and servicing each subscriber costs $4 (email delivery, support, payment fees). Contribution margin is $16, so the business needs 250 paying subscribers to break even — $5,000 in monthly recurring revenue.
Example 3 — A high-margin product at scale. A manufacturer carries $2,000,000 in fixed costs each year, sells each unit for $25, and spends $15 in materials and factory labor per unit. The contribution margin is $10, pushing the annual break-even out to 200,000 units, or $5,000,000 in revenue. This example shows why high-fixed-cost businesses need huge volume before they earn a cent — and why scaling aggressively is usually the right strategic choice once the product works.
FAQ
What is a break-even point?
The break-even point is the sales volume at which total revenue equals total costs. At that volume your business makes neither a profit nor a loss; every unit sold below it loses money, and every unit sold above it contributes pure profit. The formula is Fixed Costs ÷ (Price − Variable Cost per Unit).
How do I calculate break-even revenue?
Find break-even units first (fixed costs divided by the contribution margin per unit), then multiply by the price per unit. Equivalently, divide fixed costs by the contribution margin ratio. In the $10,000 fixed-cost example with a 40% margin ratio, break-even revenue is $10,000 ÷ 0.40 = $25,000.
What is a good contribution margin?
There is no universal number, because margins vary wildly by industry. Software subscriptions often post 70–85% margins, restaurants 5–15%, and manufactured goods 25–50%. A "good" margin is simply one that comfortably covers your fixed costs at a realistic sales volume. Compare your margin to competitors and watch it shrink if you raise variable costs or cut prices.
What if my price is lower than my variable cost?
Then every unit sold loses money and the break-even point does not exist — you lose more by selling more. The calculator flags this as an error, because the denominator becomes zero or negative. You must either raise the price, cut variable costs, or stop selling that product; no sales volume can fix a negative contribution margin.
Is break-even monthly, annual, or per product?
It depends entirely on the period and grouping you choose. Enter fixed costs for the exact window you care about — monthly for a café, annual for a manufacturer — and group inputs by product line. A business with several products should run this calculator once per product and weight the results by expected sales mix.
How does target profit change the break-even point?
To earn a desired profit rather than merely break even, add the target profit to fixed costs in the numerator: Units = (Fixed Costs + Target Profit) ÷ Contribution Margin per Unit. For example, wanting $5,000 of monthly profit on the $10,000 / $20 margin example means selling ($10,000 + $5,000) ÷ $20 = 750 units instead of 500.
Disclaimer
This break-even calculator is provided for informational purposes only and does not constitute financial, accounting, or tax advice. Results are estimates based on the inputs you enter and the standard break-even formula; real fixed and variable costs, price elasticity, and step costs may differ from your assumptions. Always validate your numbers with a qualified accountant or business advisor before making pricing, hiring, or investment decisions.