The break-even point is the single most important number in any small business or startup plan: the sales volume at which total revenue exactly covers total costs, so profit is zero. Sell one more unit beyond it and you are profitable; sell one less and you are losing money. Knowing this number tells you whether a pricing idea, a product launch, or a lease is realistic before you commit.
The math behind it is simple. Fixed costs — rent, salaries, insurance, software subscriptions — stay the same no matter how much you sell. Variable costs — materials, packaging, per-order fees — scale with every unit sold. The difference between your selling price and variable cost per unit is the contribution margin: what each sale contributes toward covering fixed costs. Divide fixed costs by the contribution margin and you get your break-even point in units.
Our calculator goes further. It also reports break-even revenue (the dollar sales target), your contribution margin ratio, and — if you enter expected sales — your margin of safety, which measures how far sales could drop before you start losing money. A 25% margin of safety means sales could fall a quarter and you would still break even.
Use this whenever you price a product, evaluate a new location, or decide whether a marketing campaign's cost is justified. Pair it with our Freelance Rate Calculator or Rental Property Calculator for a complete picture of your numbers.
How to use the Break-Even Calculator
- Enter your fixed costs — total rent, salaries, insurance and subscriptions for one month (or one year; just be consistent).
- Enter your selling price per unit and the variable cost per unit — everything it costs you to make and deliver one more unit.
- Optionally add expected units sold to see your margin of safety and forecasted profit.
- Click Calculate Break-Even to see your break-even units, revenue, contribution margin and margin of safety.
Tips for an accurate break-even analysis
- Don't forget "hidden" fixed costs: payment processing fees, software subscriptions, and insurance renewals.
- Include shipping and packaging in variable cost — they eat margins faster than most founders expect.
- If your price must be below variable cost, no sales volume will save you — raise the price or cut the cost first.
- Re-run the analysis every quarter: costs drift, and break-even points move with them.
How to lower your break-even point
You have three levers. Cut fixed costs — renegotiate rent, cancel unused subscriptions. Raise your price — even a small increase goes straight to contribution margin. Or reduce variable costs — negotiate supplier terms, buy in bulk, or automate labor. Improving any single lever lowers the number of units you must sell before turning a profit.
Frequently asked questions
What is the break-even point?
The break-even point is the sales volume at which total revenue exactly covers total costs — profit is zero. Sell one more unit past it and you are profitable; sell one less and you are losing money.
What is the break-even formula?
Break-even units = fixed costs ÷ (selling price per unit − variable cost per unit). Break-even revenue = break-even units × selling price. The denominator, price minus variable cost, is called the contribution margin.
What is contribution margin?
The contribution margin is what each sale contributes toward covering fixed costs: selling price minus variable cost per unit. A higher contribution margin means you break even at a lower sales volume.
What is margin of safety?
Margin of safety measures how far actual or expected sales can fall before you start losing money: (expected sales − break-even sales) ÷ expected sales. A 25% margin of safety means sales could drop a quarter and you would still break even.
How can I lower my break-even point?
Three levers: cut fixed costs (rent, subscriptions), raise your price, or reduce variable costs (cheaper materials, better supplier terms). Improving any one lowers the units you must sell before turning a profit.