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Break-even calculator
The break-even point is the level of sales at which a business covers all its costs and makes neither a profit nor a loss. Enter your fixed costs, the price you sell each unit for, and the variable cost of making or buying one unit, and this tool returns how many units you must sell to break even, the revenue that represents, the contribution each sale makes, and your contribution margin. It is one of the first calculations any new venture should run, because it turns a vague hope into a concrete target: sell this many and you are safe, fall short and you are losing money. Fixed costs are the overheads that stay the same whatever you sell, such as rent, insurance, software and salaried staff. Variable costs rise with each unit, such as materials, packaging and payment fees. The gap between the price and the variable cost is what each sale contributes toward those fixed costs, and once the fixed costs are fully covered, that contribution becomes profit.
The break-even point is where total revenue exactly covers fixed and variable costs, so profit is zero. Every unit sold beyond it adds its contribution, the selling price minus the variable cost, straight to profit. Fixed costs here are the overheads that do not change with output, such as rent, insurance or salaried staff.
How it works
- Enter your fixed costs, the overheads that do not change with how much you sell, over the period you are planning for.
- Enter the selling price of one unit, before any sales tax.
- Enter the variable cost of one unit, what each extra sale costs you in materials, handling and fees.
- The tool subtracts the variable cost from the price to find the contribution each unit makes.
- It divides the fixed costs by that contribution to give the number of units needed to break even, then multiplies by the price for the break-even revenue.
break-even units = fixed costs / (price - variable cost); break-even revenue = units x price
Each unit sold brings in its price but costs its own variable cost to provide, so it contributes the difference toward the fixed overheads. Dividing the total fixed costs by that per-unit contribution gives the number of units needed before the overheads are fully paid and profit begins. Multiplying those units by the selling price gives the revenue at that point. The contribution margin, the contribution as a percentage of the price, shows how much of each sale is working toward fixed costs rather than its own cost.
- fixed costs
- overheads that do not change with output
- price
- the selling price of one unit, before tax
- variable cost
- the cost of providing one more unit
- contribution
- price minus variable cost, per unit
How contribution per unit changes the units needed
| 5 contribution per unit | 2,000 units | thin margin, high volume needed |
| 10 contribution per unit | 1,000 units | the worked example |
| 20 contribution per unit | 500 units | on fixed costs of 10,000 |
| 50 contribution per unit | 200 units | high margin, low volume |
Worked example
Your fixed costs are 10,000 a month, you sell each unit for 25, and each one costs 15 to make: every sale contributes 10 toward the fixed costs, a contribution margin of 40 percent. Dividing 10,000 by 10 means you must sell 1,000 units a month to break even, which is 25,000 in revenue. Unit 1,001 is the first to make a profit, and each one after that adds 10 straight to the bottom line.
Key facts
- Break-even is where revenue exactly equals total costs, so profit is zero.
- The higher the contribution per unit, the fewer sales you need to cover the same fixed costs.
- If the selling price is at or below the variable cost, no level of sales will break even.
- Past break-even, the whole contribution from each extra sale falls to profit, since fixed costs are already paid.
Tips
- Be honest about fixed costs, because forgetting your own time or a quiet overhead pushes the real break-even point higher than the figure shows.
- To plan for profit, add the profit you want to the fixed costs before dividing, rather than aiming only to break even.
- Raising the price or trimming the variable cost lifts the contribution and lowers the volume you need, often more easily than chasing extra sales.
- Recheck the point whenever rent, materials or staffing change, since a small cost rise can move the target a long way.
Frequently asked questions
What is the difference between fixed and variable costs?+
Fixed costs stay the same no matter how much you sell, such as rent and insurance. Variable costs change with output, such as materials and packaging. Some costs are part fixed and part variable, like a phone plan with a base fee plus usage; split those between the two.
What is contribution margin?+
It is the share of each sale left after its own variable cost, available to cover fixed costs and then profit. Selling at 25 with a 15 variable cost gives a 10 contribution, or a 40 percent margin. The higher it is, the fewer units you need to break even.
What if the price is below the variable cost?+
Then every sale loses money before fixed costs even enter, so there is no break-even point at any volume. You would need to raise the price or cut the variable cost per unit before the business can work.
How do I use the break-even point to set a target?+
Treat it as a floor. Add the profit you want to the fixed costs and divide by the contribution to find the units for that profit. Reaching only break-even means a year of work for no reward, so most plans aim well above it.
Does break-even include tax?+
This is a pre-tax operating calculation. Sales tax is collected for the authority and is not revenue, so use prices before tax. Income or corporation tax applies only to profit above break-even, not to the break-even point itself.
Can fixed costs really be fixed?+
Only within a range. Sell enough and you may need a bigger unit, more staff or another machine, which lifts fixed costs to a new level. Recheck the break-even point whenever your capacity or overheads change.
Things to watch
- Fixed costs only hold within a capacity range; growth that needs new premises or staff resets the break-even point higher.
- The model assumes every unit sells at the same price, so heavy discounting or returns push the real break-even beyond the figure.
- Breaking even is survival, not success; a plan that only reaches it leaves nothing for the owner or for reinvestment.
Last updated: 2026
This is an estimate for general guidance, not financial, tax, legal or medical advice. Figures can change and individual circumstances vary. Always confirm with the official sources listed before making decisions.
Reviewed by Vikas Dulgunde. Editorial standards.