Break-Even Calculator

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Calculate how many units you need to sell or revenue required to cover all your costs

Break-Even Formulas

Break-Even Units

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Break-Even Revenue

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Contribution Margin

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Understanding Break-Even Analysis

Break-even analysis is a fundamental business tool that determines the point at which total revenue equals total costs. At this point, there is no profit or loss - the business has 'broken even.' Understanding your break-even point is crucial for pricing decisions, cost management, and business planning.

The break-even point can be expressed in units sold or in revenue dollars. Knowing both helps you set sales targets and evaluate whether your business model is viable. If your break-even point requires selling more units than your market can absorb, you need to adjust pricing or reduce costs.

This analysis is particularly valuable for startups evaluating business viability, existing businesses launching new products, and any company considering price changes or cost reductions.

Key Components of Break-Even

🏢

Fixed Costs

Costs that stay constant regardless of production: rent, salaries, insurance, loan payments.

📦

Variable Costs

Costs that change with each unit produced: materials, direct labor, packaging, shipping.

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Contribution Margin

Revenue minus variable cost per unit. What each sale contributes toward covering fixed costs.

📊

Contribution Ratio

Contribution margin as a percentage of price. Shows profit potential per dollar of sales.

Break-Even Examples by Industry

Break-even points vary dramatically based on cost structures and pricing strategies. Here are typical scenarios:

Business Type	Fixed Costs	Contrib. Margin	Break-Even
Coffee Shop	$8,000/mo	$3.50/cup	2,286 cups/mo
SaaS Startup	$50,000/mo	$80/user	625 users
Food Truck	$3,000/mo	$6/meal	500 meals/mo
Online Course	$2,000/mo	$150/sale	14 sales/mo
Retail Store	$15,000/mo	40% margin	$37,500 revenue
Consulting	$5,000/mo	$100/hour	50 hours/mo

Strategies to Lower Break-Even Point

📉

Reduce Fixed Costs

Negotiate lower rent, switch to remote work, outsource non-core functions, or share resources with other businesses.

💰

Increase Prices

Higher prices increase contribution margin directly. Test price increases with premium positioning or added value.

⚙️

Lower Variable Costs

Negotiate with suppliers, improve production efficiency, reduce waste, or find cheaper alternatives without sacrificing quality.

📦

Change Product Mix

Focus on higher-margin products. Even at lower volume, better margins can reduce your break-even point.

How to use this break-even calculator

Enter Fixed Costs (Total) — the sum of rent, salaries, insurance, software subscriptions, and any other expense that does not scale with the number of units sold over the period you are analyzing.
Enter the Selling Price per Unit — the average revenue you actually receive per unit after typical discounts, not the list price you advertise.
Enter the Variable Cost per Unit — direct costs that scale with each sale: materials, payment processing fees, shipping, packaging, and per-unit labor.
Optional: enter a Target Profit if you want to see how many units and how much revenue you need to clear a specific profit goal on top of break-even.
Click Calculate Break-Even to see break-even units, break-even revenue, contribution margin per unit, and the contribution ratio. Hit Reset to clear the form.

Examples

Basic: small SaaS startup at $50/month

A two-person SaaS startup spends $50,000 per year on hosting, office, salaries, and tooling. Their subscription is $50/month and each customer costs about $5/month in payment processing and server load.

ResultContribution margin is $540 per customer per year and the contribution ratio is 90%. Break-even sits at 93 paying customers (about $55,560 in annual revenue). Hit 93 active subscriptions before year-end and the business clears its costs.

Annualize price and variable cost first: $50 × 12 = $600 revenue per customer and $5 × 12 = $60 variable cost per customer. Contribution margin is $600 − $60 = $540. Break-even units = $50,000 ÷ $540 ≈ 92.6, which the calculator rounds up to 93 customers. Multiply 93 by the $600 annual price for the break-even revenue figure.

Intermediate: full-service restaurant with target profit

An independent restaurant has $30,000/month in fixed costs (rent, payroll, utilities, insurance). Average ticket is $20 and food and beverage cost averages $7 per cover. The owner wants $5,000/month in profit on top of break-even.

ResultContribution margin is $13 per cover and the contribution ratio is 65%. Plain break-even is 2,308 covers (about $46,160 revenue) per month. To clear $5,000 profit, the restaurant needs 2,693 covers — roughly 90 covers per day across a 30-day month.

Contribution margin = $20 − $7 = $13. Break-even units = $30,000 ÷ $13 ≈ 2,307.7, rounded up to 2,308. For the target profit, the calculator solves ($30,000 + $5,000) ÷ $13 ≈ 2,693.4, rounded to 2,693 covers. Multiply by $20 average ticket to get the $53,860 monthly revenue target.

Edge case: thin margin on a physical product

A boutique e-commerce brand launches a $25 candle with $20 in cost of goods, packaging, and shipping. Fixed monthly costs (warehouse, ads, two part-time staff) run $8,000. They want to see whether the margin is viable.

ResultContribution margin is only $5 per candle and the contribution ratio is 20%. Break-even is 1,600 candles ($40,000 revenue) every month. Any dip in volume or rise in shipping cost erases the entire margin.

Contribution margin = $25 − $20 = $5. Break-even units = $8,000 ÷ $5 = 1,600 candles. The 20% contribution ratio is the warning sign: a $1 cost increase per candle cuts margin by 20% and pushes break-even to 2,000 units. This is a typical case where raising price by $3 or sourcing packaging $2 cheaper has a bigger impact than ad spend.

How it works

The calculator uses the cost-volume-profit identity: at break-even, revenue minus variable costs minus fixed costs equals zero. Rearranging gives Break-Even Units = Fixed Costs ÷ (Price − Variable Cost). The denominator is the contribution margin per unit — the portion of each sale left over to chip away at fixed costs.

Once units are known, break-even revenue is simply units × price. The calculator also expresses contribution margin as a ratio (margin ÷ price), which is useful for service businesses that do not have discrete 'units' and for blended product mixes. A 40% contribution ratio means every $1 of sales contributes $0.40 toward fixed costs and profit.

If you enter a Target Profit, the calculator treats it as additional fixed cost: Units for Target Profit = (Fixed Costs + Target Profit) ÷ Contribution Margin. The result is rounded up because you cannot sell a fractional unit and still cover full costs.

The model assumes price and variable cost stay constant across the volume range — a reasonable simplification for most small businesses but worth pressure-testing if you have volume discounts, step costs (an extra shift, a second location), or capacity ceilings.

When to use a break-even calculator

Pricing a new product or service. Test how many units you need to sell at different prices before committing. If a $20 price means selling 2,000 units a month and your market is 800, you need a different price, a different cost structure, or a different product.
Writing a business plan or pitch deck. Lenders, SBA loan officers, and investors expect to see a break-even point in months or units. It signals you understand your cost structure and have realistic volume assumptions.
Deciding whether to take on fixed costs. Considering a lease, a hire, or a software contract? Add the new monthly cost to Fixed Costs and recalculate. If break-even jumps by 200 units a month, you need confidence the commitment will drive at least that much extra volume.
Evaluating a price increase or discount. A 10% discount usually requires far more than a 10% volume increase to break even on the change. Run the calculator before and after to see exactly how many extra units the promotion has to move.
Monthly performance reviews. Compare actual unit sales against your break-even number each month. Hitting break-even by mid-month means the second half is profit; falling short by month-end signals the cost or pricing model needs adjustment.

Common mistakes and how to avoid them

MistakeConfusing gross margin with contribution margin
FixGross margin (used on income statements) usually only subtracts cost of goods sold. Contribution margin subtracts every cost that varies with each sale — including credit card fees, shipping, fulfillment, and sales commissions. Use contribution margin here or your break-even will look better than reality.
MistakeForgetting that variable costs scale with volume
FixIf you negotiate volume discounts on materials at higher quantities, your contribution margin changes with volume. Calculate break-even at your most likely volume tier, then re-run at lower volumes to see if the math still works if growth is slower.
MistakeLeaving the owner's salary out of fixed costs
FixIf you are paying yourself or plan to, include it in Fixed Costs. A business that breaks even only because the founder works for free is not actually viable — it is subsidized labor. Use a market-rate salary so the break-even reflects a sustainable operation.
MistakeMixing cash and accrual costs
FixDecide whether you are computing cash break-even (cash in vs. cash out) or accrual break-even (including depreciation and accrued expenses). Mixing the two — adding non-cash depreciation but ignoring loan principal payments, for example — produces a number that matches nothing on your books.
MistakeIgnoring step costs
FixSome costs jump at thresholds: hiring a second employee, opening a second location, upgrading software tiers. Plot break-even at each step and pick the volume range you are actually targeting; do not extrapolate one calculation across a 10x volume range.
MistakeNot updating the analysis when inputs move
FixRent goes up, suppliers raise prices, processors change fees. Recalculate at least quarterly, and any time a single cost line moves by more than 5–10%. Stale break-even numbers can hide months of losses.

Frequently asked questions

What's a good break-even point?

There's no universal 'good' break-even point — it depends on your industry, market size, and growth stage. Generally, you want to break even within a reasonable timeframe (3–12 months for most small businesses) and have realistic capacity to exceed it. SBA business plan templates typically expect break-even to land within the first two years for a new venture.

Do I include my own salary in fixed costs?

Yes, if the business is supposed to support you. Include a market-rate salary for the work you do, or you are calculating break-even for a hobby, not a business. The SBA and SCORE both recommend founders cost themselves into the plan so financing decisions reflect a sustainable operation.

What's the difference between cash break-even and accrual break-even?

Cash break-even is about timing: revenue collected vs. cash paid out, including loan principal but excluding non-cash items like depreciation. Accrual break-even follows your income statement: it includes depreciation but excludes loan principal. Cash break-even tells you when you stop running out of money; accrual break-even tells you when you stop running a loss on paper.

How do step costs change the analysis?

Step costs are fixed costs that jump at specific volume thresholds — for example, hiring a second cook when daily covers pass 80. Run break-even with current fixed costs to find the lower threshold, then run a second calculation with the next step added in. If volume between the two break-evens is unprofitable, that gap is the danger zone.

When should I recalculate my break-even point?

Recalculate at least quarterly, plus any time a major input changes by 5% or more: a rent increase, a supplier price change, a new hire, a price adjustment, or a shift in product mix. Many small businesses also recalculate at the start of each fiscal year as part of budgeting.

How do I calculate break-even for multiple products?

Compute a weighted-average contribution margin: multiply each product's contribution margin by its share of the sales mix, sum them, then divide fixed costs by that weighted figure. As a sanity check, also calculate break-even for each product separately so you can spot any item dragging the blended number down.

What's the difference between break-even and payback period?

Break-even measures when ongoing revenue covers ongoing costs in a given period (usually monthly). Payback period measures how long it takes cumulative profits to recover the initial investment (startup capital, equipment, build-out). A business can break even every month and still be years away from paying back the original investment.

Should I include depreciation in fixed costs?

For accrual break-even (matching your income statement), yes — depreciation represents the cost of using long-lived assets. For cash break-even (matching your bank account), exclude depreciation but include cash items like loan principal payments. State which version you are presenting so investors and lenders can compare apples to apples.

How does break-even relate to margin of safety?

Margin of safety is the gap between your actual (or projected) sales and your break-even point, usually expressed as a percentage. A 30% margin of safety means sales can fall 30% before you stop covering costs. Higher margins of safety are typically safer in cyclical industries — the SBA recommends at least 20%–25% for retail and food businesses.

What if my contribution margin is negative?

If variable cost exceeds price, every sale loses money and there is no break-even point — selling more makes things worse. The calculator will flag this. Fix it by raising price, cutting variable costs (better supplier terms, cheaper materials, less expensive shipping), or discontinuing the product.

Sources

Calculate your startup costs · U.S. Small Business Administration
Publication 535: Business Expenses · Internal Revenue Service
Break-Even Analysis: What, Why, and How · SCORE Association
Small Business Lending Survey · Federal Reserve Economic Data (FRED)
Write your business plan · U.S. Small Business Administration

Methodology

Break-even units are computed as Fixed Costs ÷ (Selling Price − Variable Cost), rounded up to the nearest whole unit because partial sales cannot cover full costs. Break-even revenue is units × selling price. Contribution margin equals price minus variable cost, and the contribution ratio is that margin divided by price. Target profit, when entered, is added to fixed costs before the division: (Fixed Costs + Target Profit) ÷ Contribution Margin. The model assumes price and variable cost are constant across the relevant volume range and ignores step costs and capacity limits; for businesses with volume-tier pricing or shift-based labor, run the calculation at each step.

Learn more about our methodology →

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