Break Even Point Calculator
Find the unit volume at which total revenue equals total cost — the threshold beyond which a business starts generating profit. The classic break-even formula is fixed costs ÷ (price per unit − variable cost per unit).
Last updated: May 2026
Compare with similar
About this calculator
The break-even point in units is the sales volume at which total revenue exactly equals total cost (fixed plus variable), so profit is zero. The formula is Q = FC / (P − VC), where FC is total fixed costs (rent, salaries, software, insurance — costs that do not change with volume in the short term), P is the selling price per unit, and VC is the variable cost per unit (raw materials, packaging, shipping, sales commissions — costs that scale linearly with volume). The denominator (P − VC) is the contribution margin per unit — the dollars each sale contributes toward covering fixed costs after variable costs are paid. Once you have sold Q units, all fixed costs are covered; every unit beyond Q adds its full contribution margin directly to profit. Variables: fixedCosts ≥ 0; pricePerUnit > variableCostPerUnit (otherwise the contribution margin is zero or negative and no break-even exists at any volume). Edge case: if P ≤ VC, every unit loses money and the calculator returns an error message rather than infinity or a negative number. The formula assumes a single-product business with constant unit prices and costs over the relevant volume range. In reality, fixed costs often have step functions (you need a second warehouse at some volume, hire a second customer-service rep, etc.) and prices may vary with volume — the simple break-even is a useful planning tool, not a precise prediction. For multi-product businesses, replace P − VC with a weighted-average contribution margin across the product mix, weighted by expected revenue share.
How to use
Example 1 — Candle business. You rent a workshop for $2,000/month, pay yourself a base salary of $3,000/month, and spend $500 on insurance and software, totalling $5,500 in monthly fixed costs. Each candle costs $4 in materials and ships for $1, variable cost per unit = $4 (using simplified materials only). Sale price = $25. Enter Fixed Costs = 5500, Price per Unit = 25, Variable Cost per Unit = 4. Q = 5500 / (25 − 4) = 5500 / 21 ≈ 261.9 candles. ✓ You need to sell ~262 candles per month to cover costs; the 263rd candle is where profit begins. Example 2 — SaaS startup. Monthly fixed costs are $80,000 (engineering, office, baseline AWS, marketing). Variable cost per customer is $8/month (per-seat AWS, payment processing, support tickets). Subscription price is $49/month. Enter 80000, 49, 8. Q = 80000 / (49 − 8) = 80000 / 41 ≈ 1951.2 → round up to 1,952 customers. ✓ Once the company hits ~2,000 paying customers it covers baseline burn; each additional customer adds $41 toward profit (before considering acquisition cost).
Frequently asked questions
What is contribution margin and how does it relate to break-even?
Contribution margin is selling price minus variable cost — the dollars each unit sold "contributes" toward covering fixed costs and (after break-even) toward profit. As a ratio, contribution margin per unit ÷ selling price = contribution margin ratio, the percentage of each sale that flows to fixed-cost coverage and profit. A product with a high contribution margin ratio (software, digital downloads, services) breaks even at relatively low volumes because each sale carries a lot of the load; a product with a low ratio (groceries, commodity manufacturing) requires huge volumes and is extremely sensitive to price changes. Break-even in units uses per-unit contribution margin; break-even in revenue is fixed costs ÷ contribution margin ratio. Understanding contribution margin is the foundation of pricing, cost-cutting, and product-mix decisions.
What is the margin of safety and why does it matter?
Margin of safety is the gap between your actual or forecast sales and the break-even point, expressed in units, dollars, or as a percentage. If you break even at 262 units and actually sell 400, your margin of safety is 138 units, or 35% — meaning sales would have to drop by 35% before you started losing money. A large margin of safety means the business can absorb downturns; a thin margin (5–10%) means a small dip in demand or small cost increase can wipe out profitability. For new businesses, lenders and investors examine break-even projections to judge how realistic the plan is — a model that requires 95% capacity utilisation to break even is a very different proposition from one that breaks even at 30%. Margin of safety turns break-even from a single point into a meaningful risk metric.
How does break-even analysis change with multiple products?
When you sell multiple products, you cannot just sum unit break-evens because each product has a different contribution margin per unit. The standard approach is a weighted-average contribution margin: weight each product's contribution margin by its share of expected revenue mix, then divide total fixed costs by the weighted-average margin to get break-even revenue. For example, if Product A has $20 contribution and is 60% of revenue, and Product B has $5 contribution and is 40%, weighted-average contribution = (20·0.6 + 5·0.4) = $14; total fixed costs ÷ 14 gives break-even units of the "typical bundle". The shortcut breaks down if the mix changes — selling more of the lower-margin product than expected pushes the real break-even higher. For complex multi-product businesses, a spreadsheet model with the actual expected mix is more accurate.
What are the most common mistakes people make in break-even analysis?
The biggest is misclassifying costs — putting a variable cost into the fixed bucket (or vice versa) distorts the contribution margin and produces a wildly wrong break-even. Salaries are tricky: a salaried employee is fixed in the short run but becomes variable when you need to hire a second person to handle higher volume. The second is ignoring step-function fixed costs: at some volume you outgrow the warehouse, need a second customer-service agent, or hit AWS reserved-capacity limits, and the "fixed" cost line jumps. The third is forgetting that pricing affects volume — dropping your price to undercut a competitor lowers contribution margin but might raise unit volume, and break-even alone cannot tell you whether the net effect is positive. The fourth is using break-even as a target rather than a floor; covering costs is not a business goal, generating returns above cost of capital is. The fifth is using a single break-even number for multi-year planning — rerun the analysis quarterly as costs and prices shift.
When should I not use this calculator?
Skip this calculator for businesses where pricing varies by customer (B2B contracts with negotiated rates), bundled products with their own cost structure, or unit volume so low that "contribution margin per unit" is not meaningful (custom consulting, bespoke manufacturing). It is the wrong tool for service businesses with no clear "unit" — for those use a break-even-in-revenue calculation based on average contribution margin ratio. Do not use it for subscription businesses without modelling churn separately; the relevant SaaS question is not "how many customers do we need to break even" but "what LTV/CAC ratio supports a sustainable business given churn". It assumes selling price exceeds variable cost — if it does not, no break-even exists and the calculator returns an error. Finally, do not use a single break-even number for long-term strategic planning; sensitivity analysis (re-running ±10% on each input) reveals which variables your business is most exposed to.