Break-Even Calculator

Break-Even Analysis for Small Businesses

A break-even analysis tells you exactly how many units you need to sell (or how much revenue you need to generate) to cover all your costs. Selling one more unit beyond break-even means you are making a profit; selling one fewer means you are operating at a loss.

The Break-Even Formula

Break-Even Units = Fixed Costs ÷ (Selling Price - Variable Cost per Unit)

The denominator — selling price minus variable cost — is called the contribution margin. It represents how much each sale "contributes" toward covering your fixed costs.

Understanding Fixed vs. Variable Costs

• Fixed costs stay the same regardless of sales volume: rent, salaries, insurance, loan payments, and software subscriptions.
• Variable costs change with each unit sold: raw materials, packaging, shipping, payment processing fees, and sales commissions.

Why Break-Even Matters

Knowing your break-even point helps you set realistic sales targets, evaluate pricing strategies, and decide whether a new product or service is financially viable. Before launching anything new, run a break-even analysis to understand the minimum performance required.

Using a Profit Target

If you want to go beyond just covering costs, add a target profit to the formula. The modified formula is:

Units = (Fixed Costs + Target Profit) ÷ Contribution Margin per Unit

This tells you how many units you need to sell each month to earn your desired profit on top of covering all expenses.