Break-Even Calculator
Break-even units, revenue, contribution margin, and profit/loss at any sales volume.
Load Example
Rent, salaries, insurance, loan interest
Materials, direct labor, packaging per unit
For profit/loss and margin of safety
Break-Even Results
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Profit/Loss at Various Sales Volumes
| Units Sold | Revenue | Variable Costs | Total Costs | Profit / Loss |
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Formulas Used
What Is Break-Even Analysis?
Break-even analysis determines the sales volume at which total revenue equals total costs, resulting in neither profit nor loss. It is one of the most fundamental tools in business planning and pricing strategy, used by startups to validate business models, by managers to set sales targets, and by investors to assess business viability.
Why Break-Even Analysis Matters
- Pricing decisions: Understand the minimum price needed to cover costs at a given volume.
- Sales targets: Set minimum sales quotas for teams to cover fixed overhead.
- Investment decisions: Assess how many units a new product must sell before becoming profitable.
- Risk assessment: The margin of safety shows how much sales can drop before losses occur.
Limitations of Break-Even Analysis
Break-even analysis assumes a linear relationship between costs and revenue (constant selling price and variable cost per unit), and that all units produced are sold. In reality, bulk discounts, economies of scale, and price elasticity mean these assumptions break down at large volumes. Use break-even analysis as a planning tool, not an exact predictor.
Frequently Asked Questions
The break-even point is when total revenue = total costs (zero profit). Formula: Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit). Below this you lose money; above it you profit. It helps set minimum sales targets and evaluate whether a business model is viable.
Contribution margin = Selling Price − Variable Cost per Unit. Each unit sold first covers variable costs; the remainder (contribution margin) goes toward covering fixed costs and then generating profit. A higher CM means each sale contributes more to profitability. CM ratio = CM ÷ Selling Price × 100.
Margin of safety = (Actual/Target Sales − Break-Even Sales) ÷ Actual Sales × 100%. It shows how much sales can fall before you start losing money. A 40% margin of safety means sales can drop 40% before hitting break-even. A low margin of safety (under 10–15%) means the business is vulnerable to demand fluctuations.
Three ways: (1) Cut fixed costs — renegotiate rent, reduce headcount, eliminate unnecessary subscriptions; (2) Reduce variable costs — source cheaper materials, improve manufacturing efficiency; (3) Raise selling price — even a small price increase dramatically lowers break-even units if demand is inelastic. Analyze which lever has the highest impact for your business model.
Fixed costs don't change with production volume: rent, insurance, base salaries, loan interest, depreciation. Variable costs change proportionally with output: raw materials, direct labor per unit, packaging, shipping, sales commission per unit. Semi-variable costs (like utilities) have both components — allocate the fixed portion to fixed costs and the variable portion to variable costs.
Yes. Define a 'unit' as one hour billed, one client session, one project, or any measurable service unit. Fixed costs = overhead (office, software, base salaries). Variable costs = costs directly tied to delivering one service unit (materials, contractor fees, commission). The formulas work identically for both products and services.