Break-Even Calculator
Break-even is the point where your sales cover every fixed cost for the month and the business stops losing money. Enter your monthly fixed costs, your price and what each sale costs you, and this shows the units and the sales you need, plus what it takes to reach a profit target.
Assumes the same average price and variable cost on every sale and fixed costs that do not change with volume. Real businesses have step costs (another employee, a bigger space) that move the break-even point. Estimates only. This calculator is for educational purposes and is not financial, tax or legal advice.
How break-even works
Every sale brings in its price, but some of that money goes straight back out as the cost of making that sale: materials, packaging, card fees, shipping. What is left is the contribution margin, the part of each sale that goes toward rent, salaries and everything else that stays the same each month. Break-even is the number of sales whose contribution margins add up to your fixed costs.
Break-even units = fixed costs ÷ (price − variable cost per unit).
Break-even sales = fixed costs ÷ contribution margin ratio, where the ratio is (price − variable cost) ÷ price.
Pay yourself before you call it break-even
If you work in the business, count a fair wage for your time as a fixed cost. Otherwise "break-even" means covering the bills while you work for free, and the business looks healthier than it is. The calculator has a separate line for your pay so you can see how much of the target it is.
A worked example
A business has $8,000 of fixed costs a month, and the owner pays themself $4,000, so $12,000 in all has to be covered. It sells at an average of $45, and each sale costs $18 in materials and fees. Each sale contributes $27, a 60% contribution margin ratio.
- Break-even units: $12,000 ÷ $27 = 444.4, so 445 units a month.
- Break-even sales: $12,000 ÷ 0.60 = $20,000 a month.
- To make $3,000 of profit on top: ($12,000 + $3,000) ÷ $27 = 555.6, so 556 units, or $25,000 of sales.
What moves the number
Raising the price or cutting the variable cost lowers break-even faster than most owners expect, because both change the contribution on every single sale. In the example, a $5 price increase lifts the contribution from $27 to $32 and drops break-even from 445 units to 375. Cutting fixed costs works too, but only one dollar at a time.
Sources: break-even analysis as described by the U.S. Small Business Administration, "Calculate your startup costs". Examples on this page are calculated by Simple Money Advice; no outside statistics are used.
Frequently Asked Questions
How do I calculate my break-even point?
Subtract the variable cost of one sale from its price to get the contribution margin, then divide your monthly fixed costs by it. With $12,000 of fixed costs, a $45 price and an $18 variable cost, break-even is $12,000 divided by $27, or 445 units a month.
What counts as a fixed cost?
Costs that stay the same whether you sell a little or a lot in a month: rent, salaried payroll, insurance, software subscriptions, loan interest and similar. Count the principal part of a loan payment in your cash planning, not here: it repays the loan rather than being a cost of running the business. Costs that rise with each sale, like materials, packaging, shipping and card fees, are variable costs.
What is the contribution margin ratio?
The share of each sales dollar left after variable costs. A $45 sale with $18 of variable cost has a $27 contribution, a 60% ratio. Dividing fixed costs by that ratio gives break-even sales in dollars.
What if my price is below my variable cost?
Then every sale loses money and there is no break-even point: selling more only makes the loss bigger. The price has to be above the variable cost per unit before volume can cover fixed costs.