Break-Even Calculator: Units, Revenue & Margin

The break-even formula

Break-even is the point where total revenue equals total costs, so profit is exactly zero. For a single product: break-even units = fixed costs ÷ (price − variable cost per unit). The denominator is the contribution margin, what each sale leaves over after paying for itself, available to cover rent, salaries, and eventually profit.

Break-even revenue is units × price, or equivalently fixed costs ÷ contribution margin ratio, where the ratio is contribution margin ÷ price. Both give the same answer; the ratio version is handy when you sell many products with similar margins.

Worked example: a small product business

Monthly fixed costs of $10,000 (rent, software, insurance, one part-time salary). You sell a product for $50 that costs $20 to make and ship, so each sale contributes $30, a 60 percent contribution margin. $10,000 ÷ $30 = 333.3 units. You can't sell a third of a unit, so break-even is 334 units a month, or $16,700 in revenue.

Want $5,000 a month in profit? Treat it like another fixed cost: ($10,000 + $5,000) ÷ $30 = 500 units. Enter a target profit in the calculator to see this directly.

Price is the strongest lever

In the example, raising the price from $50 to $55 lifts the contribution margin from $30 to $35. Break-even drops from 334 units to 286, about 14 percent fewer sales needed for a 10 percent price increase. Cutting variable cost by $5 does the same thing. Cutting fixed costs by $1,000 lowers break-even by only 34 units.

That asymmetry is why discounting is dangerous. A 20 percent sale drops the price to $40 and the contribution margin to $20, so break-even jumps to 500 units, 50 percent more volume just to stand still. Before running a promotion, check whether it will realistically bring that many extra sales.

Classifying costs correctly

Fixed costs do not change with volume in the short run: rent, salaried staff, insurance, loan payments, software subscriptions, and accounting fees. Variable costs scale with each unit: materials, packaging, shipping, payment processing (often about 3 percent of the sale plus a fixed fee per transaction), marketplace fees, and sales commissions.

Payment and marketplace fees are the most commonly forgotten variable costs. On a $50 sale, 3 percent processing plus a 15 percent marketplace fee is $9 per unit, which would cut the example's margin from $30 to $21 and push break-even to 477 units. Some costs are mixed, like a utility bill with a base charge and a usage charge; split them into their fixed and variable parts.

Break-even time for a new business or project

For a startup or a big purchase, ask how many months until the upfront investment pays back. Divide the upfront cost by monthly profit after break-even. If opening costs are $30,000 and you expect $2,500 a month in profit once running, payback takes 12 months. The SBA suggests this kind of break-even analysis as part of any business plan, and lenders will ask for it.

Be honest about ramp-up. Few businesses hit steady-state sales in month one, so model the first six months at a fraction of expected volume. If break-even is only reachable in the optimistic case, the plan needs a higher price, lower costs, or more starting capital.

Limits of the model

Break-even analysis assumes a constant price and constant variable cost per unit. In reality, bulk purchasing lowers unit costs as you grow, and fixed costs step up when you need a bigger space or another hire. It also ignores taxes and the timing of cash: you might be profitable on paper while waiting 60 days for invoices to be paid. Use it for fast what-if decisions, then build a cash flow forecast for anything serious. The calculator runs in your browser and saves nothing.