The break-even point is the number of units, or the amount of revenue, you need to cover all your costs. Below it you lose money; above it, every sale adds profit. Use the free break-even calculator below to find your break-even units and revenue, and how much you need to sell to hit a profit target.
Break-Even Calculator
Enter your monthly fixed costs, the price you sell each unit for and the variable cost of each unit. Add a target profit to see the sales needed to reach it.
Break-Even Formula
Break-even point (units) = Fixed costs ÷ (Selling price per unit − Variable cost per unit)
The part in brackets is the contribution margin per unit: the amount each sale contributes toward fixed costs. To get break-even in dollars:
Break-even point (revenue) = Fixed costs ÷ Contribution margin ratio
where Contribution margin ratio = (Price − Variable cost) ÷ Price.
Break-Even Example
A business has $20,000 of fixed costs a month, sells its product for $50 and spends $30 per unit on product, freight and packaging.
| Step | Calculation | Result |
|---|---|---|
| Contribution margin per unit | $50 − $30 | $20 |
| Contribution margin ratio | $20 ÷ $50 | 40% |
| Break-even units | $20,000 ÷ $20 | 1,000 units |
| Break-even revenue | $20,000 ÷ 0.40 | $50,000 |
| Units for $5,000 profit | ($20,000 + $5,000) ÷ $20 | 1,250 units |
So the business needs to sell 1,000 units a month to cover its costs, and 1,250 units to make $5,000 of profit.
Fixed Costs vs Variable Costs
| Fixed costs (stay the same each month) | Variable costs (rise with each unit sold) |
|---|---|
| Rent and utilities | Product or raw material cost |
| Salaries and benefits | Inbound freight, duties and customs fees |
| Insurance | Packaging and shipping to customers |
| Software subscriptions | Payment processing fees |
| Loan repayments and interest | Sales commissions |
For imported goods, build your variable cost from the landed cost per unit, not just the supplier price, or your break-even point will look lower than it really is.
How to Lower Your Break-Even Point
- Raise your price. A higher price increases contribution margin per unit. Our markup calculator helps you set it.
- Cut variable costs. Negotiate supplier pricing, consolidate shipments or improve payment terms to capture early-payment discounts.
- Trim fixed costs. Review subscriptions, space and overheads you no longer need.
- Change your product mix. Push products with a higher contribution margin.
Margin of Safety
Once you know your break-even point, the margin of safety shows how far sales can fall before you start losing money:
Margin of safety = (Actual sales − Break-even sales) ÷ Actual sales
If you sell 1,250 units and break even at 1,000, your margin of safety is 250 ÷ 1,250 = 20%. Track it alongside a cash flow forecast, because breaking even on paper doesn't guarantee you have cash on hand when bills are due.
Free calculators: Markup calculator · Gross margin calculator · Inventory turnover calculator · Line of credit calculator · Net 30 calculator · Invoice factoring calculator · Freight class calculator
Free templates: Price list template · Invoice tracker template · Purchase requisition template
Frequently Asked Questions
What is the break-even point?
The break-even point is the sales level where total revenue equals total costs, so the business makes neither a profit nor a loss. Every unit sold above it adds profit.
What is the break-even formula?
Break-even units = fixed costs ÷ (selling price per unit − variable cost per unit). Break-even revenue = fixed costs ÷ contribution margin ratio.
How do you calculate break-even revenue?
Divide fixed costs by the contribution margin ratio. With $20,000 of fixed costs and a 40% contribution margin ratio, break-even revenue is $20,000 ÷ 0.40 = $50,000.
What is contribution margin?
Contribution margin is the selling price minus the variable cost per unit. It is the amount each sale contributes toward fixed costs and then profit.
What happens if variable cost is higher than price?
Then each sale loses money, the contribution margin is negative and you can never break even, no matter how many units you sell. You need to raise prices or cut variable costs.
How do I lower my break-even point?
Raise your price, reduce variable costs per unit (for example by buying in larger volumes) or cut fixed costs. Each of these means fewer sales are needed to cover your costs.
Need cash to get past break-even? Drip Capital offers collateral-free working capital of up to $3M, with funds in 24–48 hours and 30–90 day repayment terms. Check your eligibility
