How to Calculate Your Break-Even Point

Published October 12, 2026

Free tool: Break-Even Calculator→

Your break-even point is the sales level where revenue exactly covers your costs, with no profit and no loss. Knowing it tells you whether a business, product or price is realistic before you commit. This guide explains the formula and how to use it, with a worked example, using the free Break-Even Calculator.

Fixed costs, variable costs and contribution margin

• Fixed costs stay the same whatever you sell: rent, salaries, insurance, software.
• Variable costs rise with each unit: materials, packaging, shipping, payment fees.
• Contribution margin = price − variable cost per unit. It's what each sale contributes toward fixed costs, and then profit.

The formula

Break-even units = fixed costs ÷ contribution margin per unit

Example: fixed costs of $10,000 a month, a price of $50 and variable costs of $30 per unit:

• Contribution margin: $20 per unit, or 40% of each sale
• Break-even: $10,000 ÷ $20 = 500 units, or $25,000 of sales

Planning for a profit

Add your profit target to the fixed costs:

Units for a target profit = (fixed costs + target profit) ÷ contribution margin

To earn $5,000 a month: ($10,000 + $5,000) ÷ $20 = 750 units.

If you expect to sell 800 units, profit would be 800 × $20 − $10,000 = $6,000, and your margin of safety (how far sales could fall before you start losing money) is (800 − 500) ÷ 800 = 37.5%.

How to lower your break-even point

• Raise the price. At $55, the contribution margin becomes $25 and break-even drops to 400 units; at 800 units, profit rises to $10,000. Check that demand holds up.
• Cut variable costs with better supplier terms or cheaper shipping.
• Reduce fixed costs, which lowers the bar for every month.

The analysis assumes a constant price and variable cost per unit and that fixed costs don't change with volume, which holds only within a normal range of sales.

Break-even in a business plan

Lenders and investors often ask for break-even analysis. Pair it with your margins per product; see Profit Margin vs Markup. For one-off investments such as equipment, the payback period answers a similar question; see How to Calculate the Payback Period.

How to use the Break-Even Calculator

1. Open the Break-Even Calculator.
2. Enter your fixed costs, price per unit and variable cost per unit.
3. Enter a target profit and the units you expect to sell.
4. Read the results: the break-even point in units and sales, the contribution margin and its ratio, the units needed for your target profit and the profit at your expected sales, with a chart of revenue against total cost, a profit-or-loss chart and a table of profit at different sales levels.

Frequently asked questions

How do I calculate the break-even point?

Divide fixed costs by the contribution margin per unit (price minus variable cost). $10,000 ÷ ($50 − $30) = 500 units.

What is a contribution margin?

The amount each unit contributes to fixed costs and profit after its variable costs. At a $50 price and $30 variable cost, it's $20, or 40% of the price.

What is the margin of safety?

How much sales can fall before you reach break-even, as a share of expected sales. Expecting 800 units with a 500-unit break-even gives a 37.5% margin of safety.