Break-even Calculator

What this tool does

The Break-even Calculator uses fixed costs, selling price and variable cost per unit to find the break-even point in units and revenue. It also shows the contribution margin, the volume needed for a target profit and how far expected sales can fall before you make a loss.

The break-even point is the sales volume at which revenue exactly covers all costs, so profit is zero. Below it you make a loss; above it each extra unit adds profit. Knowing this number helps you test whether a product, shop or service is viable before you commit money, and shows how much room you have if sales disappoint.

Each unit sold contributes price minus variable cost towards fixed costs; this is the contribution margin. Break-even units = fixed costs ÷ contribution margin, and break-even revenue = fixed costs ÷ contribution margin ratio. The calculator also adds a target profit to the fixed costs to find the volume needed, and compares expected sales with break-even to give the margin of safety. A chart plots revenue against total cost so you can see where the lines cross.

How to use Break-even Calculator

1. Choose your currency and enter fixed costs for the period, such as a month.
2. Enter the selling price per unit.
3. Enter the variable cost per unit: materials, packaging, commission and delivery.
4. Optionally enter a target profit for the same period.
5. Optionally enter expected sales to see projected profit and margin of safety.
6. Read the break-even units and revenue and review the chart and volume table.

Tips for better results

• Keep the period consistent: monthly fixed costs need monthly sales figures.
• Raising price or cutting variable cost both lower break-even; test each in the calculator.
• For several products, use a weighted average price and variable cost based on your sales mix.
• A margin of safety below 10 to 15% leaves little cushion against a slow month.

Common use cases

• Testing a new product or café idea before launch.
• Deciding whether to rent a larger workshop with higher fixed costs.
• Setting monthly sales targets for a team.
• Explaining to investors when the business will start making money.

Common mistakes to avoid

• Putting fixed costs such as rent into the variable cost per unit.
• Ignoring payment-gateway fees, returns and discounts that lower the real price.
• Assuming the price can stay the same at very high volumes.