Know the exact point you start making money.
Enter your fixed costs, your price and your cost per unit. See how many units you must sell to cover everything, the revenue that takes, and how each unit past break-even turns into pure profit.
Your numbers
What these numbers tell you
The break-even chart
Revenue and total cost as units sold rise
At break-even, where the money goes
Fixed costs vs total variable costs
Break-even scorecard
Profit or loss at different sales levels
Contribution margin per unit is the price minus the variable cost. Below break-even you post a loss, above it every unit is pure profit.
| Units sold | Revenue | Variable costs | Fixed costs | Profit / loss |
|---|
Break-even analysis, explained
Break-Even Formula
Break-even units = Fixed Costs / (Price - Variable Cost per unit). Each unit sold above variable cost contributes the difference to fixed costs. Sell enough to cover fixed = breakeven.
Contribution Margin
Price minus variable cost per unit = contribution margin. Each unit sold contributes this much to fixed costs and profit. Higher contribution margin = lower break-even point.
Beyond Break-Even
Each unit sold above break-even is pure profit (until fixed costs change). The 100th unit beyond break-even adds the same profit as the 1000th unit until you need more capacity.
Sensitivity Analysis
What if you raise price 10%? What if variable costs go up? Run multiple scenarios to understand pricing power. Often small price increases dramatically lower break-even.
Common questions
What counts as fixed cost?
Costs that don't vary with sales: rent, salaries (not commissions), insurance, software subscriptions, loan payments.
What counts as variable cost?
Costs that scale with unit production/sale: materials, shipping, payment processing, hourly labor, sales commissions.
Should I include taxes?
No, break-even is operating income breakeven. After-tax breakeven requires net income calculation.
What if variable cost equals price?
Negative contribution margin. You lose money on every unit. Never break even. Need to raise price or cut variable cost first.
How does break-even help pricing decisions?
Lower break-even = lower risk. Higher prices reduce units needed to break even. Pricing power directly affects survival.
Estimates for planning only. Real break-even depends on your true fixed and variable costs, discounts, returns, taxes and demand at each price. Verify your cost figures before you set a price.