How to use the break-even calculator
- 1Enter your fixed costs for a period, such as a month.
- 2Enter the price you sell each unit for and the variable cost of each unit.
- 3Optionally add a target profit.
- 4Read how many units you need to sell, and check the profit table.
The break-even point
You break even when sales exactly cover your costs, with no profit and no loss. Each sale contributes price − variable cost towards your fixed costs. Divide fixed costs by that contribution to get the number of sales needed:
break-even units = fixed costs ÷ (price − variable cost per unit)
With 6,000 of monthly fixed costs, a 45 price and an 18 variable cost, each sale contributes 27, so you need 223 sales a month to break even.
Fixed and variable costs
- Fixed costs stay the same however much you sell: rent, salaries, software, insurance.
- Variable costs rise with each sale: materials, packaging, shipping, payment fees.
Using the result
If the break-even number looks out of reach, you can raise the price, cut the variable cost per unit, or reduce fixed costs. The profit table shows how quickly profit grows once you pass the break-even point.
Frequently asked questions
What is contribution margin?
The amount each sale contributes to covering fixed costs and profit: price minus variable cost per unit.
Why is the answer rounded up?
You cannot sell part of a unit, so the calculator rounds up to the first whole number of sales that covers your costs.
What if my price is below my variable cost?
Then every sale loses money and you can never break even. Raise the price or reduce costs.
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