How many sales until you profit.
Enter your fixed costs, your cost per unit and your price. See the exact units and revenue where you stop losing money and start making it.
Your costs
What this means
Revenue vs cost
Profit at different volumes
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Break-even, explained
What Is the Break-Even Point?
The break-even point is the level of sales at which total revenue exactly equals total costs, resulting in neither profit nor loss. At this point, every dollar of fixed costs, rent, salaries, insurance, and other overhead, has been covered by the contribution margin from sales. Any sales beyond the break-even point generate pure profit, while sales below it mean the business is operating at a loss. Understanding your break-even point is essential for setting sales targets, evaluating business viability, and making informed decisions about pricing, costs, and growth strategies.
How to Calculate Break-Even in Units and Revenue
Break-even in units is calculated by dividing total fixed costs by the contribution margin per unit, where contribution margin equals the selling price minus variable cost per unit. For example, if fixed costs are $50,000, the product sells for $100, and the variable cost is $60, the break-even point is 1,250 units ($50,000 ÷ $40 contribution margin). To express break-even in revenue dollars, divide fixed costs by the contribution margin ratio (contribution margin per unit divided by selling price). In this example, the break-even revenue would be $125,000 ($50,000 ÷ 0.40), giving you a clear sales target to aim for.
Using Break-Even Analysis for Pricing Decisions
Break-even analysis is a powerful tool for evaluating how price changes affect profitability. Raising prices increases the contribution margin per unit, lowering the number of units needed to break even, but it may also reduce demand. Conversely, lowering prices may increase volume but requires selling more units to cover fixed costs. By running break-even calculations at different price points, businesses can find the optimal balance between margin and volume. This analysis is particularly valuable when launching new products, entering new markets, or responding to competitive pricing pressure.
Lowering Your Break-Even Point
Lowering your break-even point makes your business more resilient by requiring fewer sales to cover costs. The most direct approach is reducing fixed costs, negotiating lower rent, switching to more affordable software, or restructuring staffing to include more variable compensation. Increasing your contribution margin by raising prices or sourcing cheaper materials also lowers the break-even threshold. Many successful businesses pursue both strategies simultaneously, creating lean cost structures while maximizing the value they deliver to customers. A lower break-even point means faster profitability, better cash flow, and more capacity to survive economic downturns.
Common questions
What is the break-even formula?
Break-even in units equals fixed costs divided by (price per unit minus variable cost per unit). The difference between price and variable cost is called the contribution margin. Break-even revenue equals break-even units multiplied by the selling price.
What if my variable cost is higher than my price?
If variable cost exceeds the selling price, you lose money on every unit sold and can never break even. You would need to either raise your price, reduce variable costs, or reconsider the product entirely. The contribution margin must be positive to reach break-even.
How can I lower my break-even point?
Reduce fixed costs by negotiating rent, outsourcing, or going remote. Lower variable costs through better supplier deals or more efficient processes. Raise prices if the market allows it. Each of these improves your contribution margin or reduces the amount you need to cover.
Should I include all costs as fixed or variable?
Fixed costs stay the same regardless of sales volume (rent, salaries, insurance). Variable costs change with each unit sold (materials, shipping, commissions). Some costs are semi-variable, like utilities, and should be split into their fixed and variable components for accurate analysis.
Estimates only. Real break-even shifts with volume discounts, stepped fixed costs and price changes.