Break-Even Calculator

Break-Even Analysis — The Foundation of Business Profitability

The break-even point is where total revenue equals total costs — neither profit nor loss. Every unit sold beyond that point generates pure profit. Understanding your break-even helps you set prices, plan marketing spend, decide whether to launch a product, and know when your business becomes sustainable. It's the first number any serious business owner must know.

Contribution Margin and Why It Matters

The contribution margin (selling price minus variable cost per unit) is the key metric. A $50 product with $20 variable cost has a $30 contribution margin — meaning each sale contributes $30 toward covering fixed costs. Once enough units are sold to cover all fixed costs, those $30 become profit. Break-even units = Fixed Costs ÷ Contribution Margin. If your fixed costs are $9,000/month and your contribution margin is $30, you need to sell 300 units per month just to break even.

Fixed Costs vs Variable Costs — What Goes Where

Fixed costs stay constant regardless of how much you produce or sell: rent, salaries, software subscriptions, insurance, loan payments. Variable costs scale with production: raw materials, per-unit packaging, shipping, payment processing fees, sales commissions. Getting this split right is critical — misclassifying a variable cost as fixed will understate your true break-even point and lead to pricing that loses money at scale.

How Pricing Changes Break-Even

Raising your price is the most powerful lever in break-even analysis because it increases contribution margin without adding cost. On a product with $15 variable cost and $6,000 in monthly fixed costs: at $40 price, you break even at 240 units. At $50, you break even at just 171 units — 29% fewer sales needed. But price increases must be tested against demand elasticity — a 25% price increase that costs you 30% of customers makes the math worse, not better.

• Reduce fixed costs first: Lower your break-even point before worrying about volume — every fixed cost cut is permanent
• Know your margin by product: If you sell multiple products, calculate break-even per SKU — low-margin items can hide losses
• Model at 3 price points: Always run break-even at current price, 10% higher, and 10% lower before finalizing pricing
• Target margin, not just break-even: Break-even is survival — build in your target profit margin to find your true sales target