Break-Even Calculator

Break-even analysis identifies the exact point where total revenue equals total costs — meaning neither profit nor loss is made. At the break-even point, every additional unit sold generates pure profit equal to the contribution margin. This analysis is essential for new product launches, pricing decisions, business planning, and evaluating whether a venture is financially viable.

Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit, where Contribution Margin = Selling Price − Variable Cost per Unit. For example: if fixed costs are $10,000/month, variable cost is $30/unit, and selling price is $80/unit, then contribution margin is $50/unit and break-even = $10,000 ÷ $50 = 200 units/month. Break-even revenue = 200 × $80 = $16,000/month.

The contribution margin is the revenue remaining per unit after deducting variable costs — the amount each unit "contributes" toward covering fixed costs and generating profit. Contribution Margin = Selling Price − Variable Cost. Once fixed costs are fully covered (at break-even), every additional unit sold generates profit equal to the contribution margin. The contribution margin ratio expresses this as a percentage of selling price.

Fixed costs remain constant regardless of production or sales volume — rent, salaries, insurance, loan repayments, software subscriptions. Variable costs change in direct proportion to output — raw materials, direct labor, packaging, shipping, sales commissions. Some costs are "semi-variable" (e.g., utilities) and must be split between the two categories for accurate break-even analysis.

The contribution margin ratio (CMR) shows what percentage of each dollar of revenue contributes to fixed cost recovery and profit. CMR = (Selling Price − Variable Cost) ÷ Selling Price × 100. A 62.5% CMR means $0.625 of every dollar goes toward fixed costs and profit. Higher CMR means you reach break-even faster and earn more from each incremental sale. SaaS businesses typically have CMRs above 70%; manufacturing might be 30–50%.

This calculation estimates how many months it takes to recover your fixed costs at your expected monthly sales volume. If your break-even is 200 units/month but you currently sell 150 units/month, your contribution margin per month is $7,500 against fixed costs of $10,000 — so you need $10,000 ÷ $7,500 = 1.33 months of accumulated contribution to break even. This is useful for cash flow planning and setting realistic revenue timelines.

You can lower your break-even point in three ways: (1) Reduce fixed costs — renegotiate rent, reduce headcount, cut subscriptions. (2) Reduce variable costs — negotiate supplier discounts, improve production efficiency, reduce waste. (3) Increase selling price — even a 10% price increase on a product with low variable costs dramatically reduces break-even units. The sensitivity table in this calculator shows exactly how price changes affect your break-even.

Break-even analysis is a foundational planning tool for several key decisions: pricing new products, evaluating new business lines, sizing marketing budgets (you need X revenue above break-even to fund the campaign), negotiating supplier contracts, planning staffing increases, and presenting financial viability to investors or lenders. Most banks and investors expect break-even analysis in any business plan or loan application.