Break-Even Calculator
What is Break-Even Analysis?
A break-even analysis is a critical financial calculation that tells you exactly how many products or services you need to sell to cover all your business costs. At the break-even point, your total revenue equals your total expenses—meaning you are not making a profit, but you are no longer losing money. Every sale past this point is pure profit.
The Break-Even Formula
If you want to know "how to calculate break even point in units," use this standard accounting formula:
Break-Even Point (Units) = Fixed Costs ÷ (Price per Unit - Variable Cost per Unit)
The bottom part of the equation (Price per Unit - Variable Cost per Unit) is also known as the Contribution Margin.
Frequently Asked Questions
To find your break-even point in sales revenue (dollars), you first calculate the break-even point in units using the formula above. Then, simply multiply that number of units by your selling price per unit. Our calculator does this automatically, showing you both the "Break-Even Units" and the "Break-Even Revenue."
Fixed costs are expenses that do not change regardless of how much you sell. Examples include rent, insurance, software subscriptions, and salaried employee wages. Variable costs are expenses that increase directly with every unit you produce or sell. Examples include raw materials, packaging, shipping costs, and sales commissions.
A "good" break-even point is one that is realistically achievable within your normal sales cycle. Ideally, your break-even point should be low enough that you can reach it quickly each month, leaving the rest of the month for generating profit. If your break-even point requires you to sell more units than your maximum capacity, your business model is not sustainable and you must either lower costs or raise prices.
There are three main ways to lower your break-even point: 1) Reduce fixed costs (e.g., move to a cheaper office, negotiate lower insurance). 2) Reduce variable costs (e.g., find cheaper suppliers, improve manufacturing efficiency). 3) Increase your selling price (which increases your contribution margin per unit, meaning you need to sell fewer units to cover your fixed costs).