Break-Even Calculator

How many sales until your business stops losing money? Enter your costs and price to find out — plus what it takes to hit a profit target.

The break-even formula

Break-even units = Fixed costs ÷ (Price − Variable cost per unit). The denominator is your contribution margin — what each sale contributes toward fixed costs after paying for itself. Until cumulative contribution covers fixed costs you're operating at a loss; after that, each sale's contribution margin is profit.

Fixed vs. variable — get the split right

Fixed: rent, salaries, insurance, software subscriptions, loan payments — costs that don't change whether you sell 10 units or 1,000.
Variable: materials, payment processing (~2–3% of price), packaging, outbound shipping, sales commission — costs incurred per sale.
Semi-variable costs (utilities, part-time labor) can be split, or conservatively treated as fixed.

Using break-even for decisions

Break-even analysis answers the questions that matter before spending money: Can this price point ever work at realistic volume? Does hiring (raising fixed costs) require an achievable sales bump? Would a 10% price rise (huge margin gain) lose more than the small number of customers it can afford to lose? Change one input above and watch the required units shift.

A worked example

A small studio has $6,500 of fixed costs a month — rent, insurance, software, one part-time salary. It sells a product for $45 that costs $18 in materials, packaging and payment fees.

Contribution margin is $45 − $18 = $27 per unit (60% of the price). Break-even is $6,500 ÷ $27 = 241 units a month, or $10,845 in revenue. Unit 242 is the first one that makes any profit at all — and from there, every sale contributes its full $27.

What each lever does

Change	New break-even	Effect
Baseline ($45 price, $18 cost)	241 units	—
Raise price to $49 (+9%)	210 units	31 fewer sales needed
Cut unit cost to $15	217 units	24 fewer sales needed
Hire someone (+$3,000 fixed)	352 units	111 more sales needed

Two things stand out. A modest 9% price rise removes 31 units of monthly pressure — price is almost always the most powerful lever, and the most under-used. And hiring raises the bar by 111 units a month; if that new person can't generate or enable that much additional volume, the hire loses money however busy they are.

Planning for profit, not just survival

Break-even is the floor, not the goal. To earn a $2,000 monthly profit, treat it as an extra fixed cost: ($6,500 + $2,000) ÷ $27 = 315 units. Many owners find this the more useful number — it converts a vague ambition into a specific weekly sales target of roughly 73 units.

Getting the cost split right

Fixed — rent, insurance, salaries, software subscriptions, loan payments. Unchanged whether you sell 10 units or 1,000.
Variable — materials, packaging, shipping, sales commission, and payment processing (typically 2–3% of price, which people routinely forget).
Semi-variable — utilities, hourly staff. Split them, or treat them as fixed for a conservative answer.
Your own salary — if you need to be paid, it's a fixed cost. Leaving it out produces a break-even point that quietly assumes you work for free.

Frequently asked questions

What if my price is below my variable cost?

Then every sale loses money and no volume can save you — the calculator will warn you. Either raise the price, cut per-unit costs, or discontinue the product.

How do I use this for a service business?

Treat one billable hour (or one project) as the "unit". Price = your hourly rate; variable cost = direct costs per hour (subcontractors, materials); fixed costs = everything else. Break-even shows the billable hours per month you need.

Is a lower break-even always better?

Generally yes — it means less risk. But cutting fixed costs (e.g., skipping marketing) can also cap your sales. Aim for a break-even comfortably below your realistic monthly volume, not the theoretical minimum.

How do I handle multiple products with different margins?

Use a weighted average contribution margin. If 70% of sales carry a $27 margin and 30% carry $12, the blended figure is (0.7 × 27) + (0.3 × 12) = $22.50, and you divide fixed costs by that. Recalculate whenever your sales mix shifts noticeably — a move toward lower-margin products raises your break-even without any cost changing.

Should I include tax in the calculation?

Sales tax, no — you collect it on the government's behalf, it was never yours. Income tax, not in break-even either, since there's no profit to tax at that point. But when you set a profit target, remember it's pre-tax: a $2,000 monthly profit goal is closer to $1,400–1,500 after tax depending on your rate.

What margin of safety should I aim for?

Margin of safety is how far current sales exceed break-even. At 241 units break-even and 320 actual, you're 33% above — sales could fall by a third before you lose money. Under 20% is uncomfortably tight for a business with any seasonality; above 40% gives real room to invest and absorb a bad quarter.