Break-Even Point Calculator
Work out how many units you need to sell — and how much revenue that is — before your business covers its costs. Add a target profit to see the volume needed to hit it, and an expected sales figure to see your margin of safety.
Break-even point (units)
350
- Break-even revenue
- £87,500.00
- Contribution margin per unit
- £100.00
- Contribution margin ratio
- 40%
- Units for target profit
- 750
- Revenue for target profit
- £187,500.00
- Margin of safety (revenue)
- £12,500.00
- Margin of safety
- 12.5%
- Profit at expected sales
- £5,000.00
Break-even units = Fixed costs ÷ (Price − Variable cost per unit), rounded up to whole units. At that volume total contribution margin exactly covers fixed costs and operating profit is zero. Units for target profit adds your profit goal to fixed costs before dividing. The margin of safety shows how far expected sales sit above (or below, if negative) the break-even point.
How to use this calculator
Enter your fixed costs for the period (rent, salaried staff, insurance, software — costs that stay the same whatever you sell), the selling price of one unit, and the variable cost of one unit (materials, direct labour, payment fees, shipping — costs incurred per unit sold). The calculator returns the break-even point in units and in revenue. Optionally add a target profit to see the volume required to earn it, and your expected sales volume to see the margin of safety — how far sales can fall before you slip into loss. Everything updates as you type, and the same formula works in any currency.
How the calculation works
Each unit sold contributes Price − Variable cost toward paying fixed costs; this is the contribution margin per unit. Break-even units = Fixed costs ÷ Contribution margin per unit — the volume at which total contribution exactly equals fixed costs and operating profit is zero. Break-even revenue = Fixed costs ÷ Contribution margin ratio (the contribution margin as a share of price). For a target profit, the volume needed is (Fixed costs + Target profit) ÷ Contribution margin per unit, because the profit goal must be covered on top of fixed costs. The margin of safety is Expected revenue − Break-even revenue, usually quoted as a percentage of expected revenue. Unit results are rounded up, since you cannot sell a fraction of a unit.
Worked example
A speaker maker sells at $250 per unit with a variable cost of $150 and fixed costs of $35,000 per month. Contribution margin = 250 − 150 = $100 per unit, a 40% contribution margin ratio. Break-even = 35,000 ÷ 100 = 350 units, or 35,000 ÷ 0.40 = $87,500 of revenue. To earn a $40,000 monthly profit: (35,000 + 40,000) ÷ 100 = 750 units ($187,500 revenue). If the company expects to sell 400 units ($100,000), its margin of safety is $100,000 − $87,500 = $12,500, or 12.5% — sales can fall 12.5% before it starts losing money — and profit at that volume is 100 × 400 − 35,000 = $5,000.
Frequently asked questions
What happens if my price is below my variable cost?
There is no break-even point — every unit you sell increases your total loss, because each sale fails to recover even its own direct cost, let alone contribute to rent and salaries. The calculator flags this rather than returning a number. It can be a deliberate short-run tactic (a loss-leader, a promotional launch price, clearing dead stock to free up cash), but as a steady state it means the unit economics are broken: the only fixes are raising the price or cutting the variable cost per unit. Cutting fixed costs, however deep, cannot rescue a negative contribution margin.
Should I use break-even in units or in revenue?
Units are the natural answer for a single product with a stable price — "we need to sell 350 a month" is a concrete operational target. Break-even revenue is more useful when you sell many products at different prices: compute a weighted-average contribution margin ratio across your sales mix, then Break-even revenue = Fixed costs ÷ that ratio. This calculator models one product (or one blended average unit); if your mix shifts toward lower-margin products, your true break-even revenue rises even if total sales hold steady.
How does a target profit change the break-even calculation?
Profit behaves like an extra fixed cost you must cover before declaring success: Required units = (Fixed costs + Target profit) ÷ Contribution margin per unit. In the worked example, breaking even takes 350 units but a $40,000 profit target takes 750 — the extra 400 units each contribute $100 toward the goal. Note the target here is operating profit before tax. If you have an after-tax goal, convert it first: Pre-tax target = After-tax target ÷ (1 − tax rate), then feed the pre-tax figure into the formula.
What is a margin of safety and what is a good one?
Margin of safety = Expected (or actual) sales − Break-even sales, usually expressed as a percentage of expected sales. It measures how much cushion you have: a 12.5% margin of safety means sales can drop 12.5% before you hit losses. A negative margin of safety means you are already selling below break-even. There is no universal "good" number — a subscription business with contracted revenue can run comfortably at 10–15%, while a seasonal or fashion-driven business may want 30%+ because demand swings are larger. The trend matters as much as the level: a shrinking margin of safety at stable sales means costs are creeping up.
Do I classify a cost as fixed or variable?
Ask: does the total cost rise when I sell one more unit? Materials, piece-rate labour, transaction fees, packaging, and shipping do — they are variable. Rent, salaries, insurance, and software licences do not — they are fixed for the period. Some costs are mixed (a phone plan with overage, utilities with a standing charge): split them into their fixed and per-unit parts. The classification is also horizon-dependent — over a month, staffing is fixed; over five years, almost everything is variable. Use the horizon that matches the decision you are making.
What are the limitations of break-even analysis?
The model assumes price, variable cost per unit, and fixed costs all stay constant across volumes — true only within a "relevant range". In reality bulk discounts lower variable costs, scaling past capacity adds step-fixed costs (a second machine, another shift), and moving more volume may require price cuts. It also ignores cash timing: a profitable month on paper can still strain cash if customers pay in 60 days. Treat the break-even point as a planning benchmark to be re-run whenever prices or costs change, not a precise prediction — and pair it with a cash-flow view for survival questions.