Break Even Calculator

How the Break-Even Calculator works

Break even calculator: units and revenue

Break-even is the volume at which total contribution equals total fixed cost. Below it every sale still loses money overall; above it every additional sale contributes almost entirely to profit. It is the single most useful number a small business can know, and it takes three inputs.

Contribution is price minus variable cost, and it is not the same as profit. If you sell for $50 and each unit costs $20 in materials, packaging and payment fees, each sale contributes $30 toward your fixed costs. It is not $30 of profit until the fixed costs are paid. Divide fixed costs by contribution and you have the break-even volume: $5,000 ÷ $30 = 167 units. The 167th sale is the one where the business stops losing money for the period.

The split between fixed and variable is a judgement, and it decides the answer. Fixed costs do not change with volume within the period: rent, salaries, insurance, software subscriptions, your own draw. Variable costs move with each unit: materials, shipping, payment processing, per-seat licence costs, hourly contractors. Some costs are genuinely both — a salesperson on base plus commission, or electricity in a workshop — and are best split rather than forced into one column. Getting this wrong in either direction misstates break-even substantially, because a cost misclassified as variable shrinks contribution on every unit while the same cost misclassified as fixed inflates the volume you think you need.

Contribution margin is the more portable figure. Contribution divided by price gives a percentage — 60% in the example above — and dividing fixed costs by that percentage gives break-even in revenue rather than units. This matters for any business that does not sell identical units. A consultancy, an agency or a restaurant cannot count "units" meaningfully, but it can say that after direct costs it keeps 60 cents in the dollar and therefore needs a certain revenue to cover overheads.

Break-even moves faster with price than with volume. Raising price by 10% while variable cost stays flat lifts contribution from $30 to $35 and cuts break-even from 167 units to 143 — a 15% reduction from a 10% change. Cutting variable cost by 10% has a smaller effect, and cutting fixed costs moves it proportionally. This asymmetry is why pricing is usually the highest-leverage thing a small business can adjust, and why discounting is so much more expensive than it looks: a 10% discount here needs a 50% volume increase just to stand still.

Use it as a floor, not a plan. Break-even tells you the point of survival, not the point of success. The target profit field extends it: add the profit you actually need to the fixed costs and divide by the same contribution to get the volume that pays you rather than merely keeps the lights on. If that volume is not achievable in the market you are selling to, the answer is a different price or a different cost base, not a bigger sales target.

Break-even units table by price

Fixed costs of $5,000 and a variable cost of $20 a unit, priced from $25 up to $71.

Break-even units and revenue at $5,000 fixed costs and $20 variable cost

Break-even formula and worked examples

The formula: break-even units = fixed costs ÷ (price − variable cost per unit). The bracket is the contribution margin per unit. Units for a target profit = (fixed costs + target profit) ÷ contribution margin.

First example. fixed costs are £12,000 a month, you sell at £40 and each unit costs £25. Contribution is £15, so you break even at 12,000 ÷ 15 = 800 units, or £32,000 of revenue.

Second example. to make £6,000 profit on top, you need (12,000 + 6,000) ÷ 15 = 1,200 units. Raise the price to £45 and contribution becomes £20, cutting break-even to 600 units.

How many units to break even? Divide fixed costs by contribution per unit and round up — you cannot sell part of a unit, so 799.2 means 800.

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