⚖️ Break-Even Calculator
Find exactly when your business starts making money — units, revenue, and timeline.
Our free Break-Even Calculator computes the exact number of units you need to sell before your business becomes profitable — and the revenue required to cover all costs. Enter your fixed costs, variable cost per unit, and selling price to get your break-even point instantly.
Break-Even Formula
Break-Even Revenue = Break-Even Units × Selling Price
Contribution Margin = Selling Price − Variable Cost Per Unit
Bakery Example
Fixed monthly costs (rent, equipment, salaries): $4,000
Variable cost per cake (ingredients, packaging): $8
Selling price per cake: $28
Contribution margin: $28 − $8 = $20 per cake
Break-even units: $4,000 ÷ $20 = 200 cakes/month
Break-even revenue: 200 × $28 = $5,600/month
The 201st cake sold is the first one generating profit.
Fixed vs Variable Costs
Fixed costs stay the same regardless of how many units you produce or sell:
- Rent and utilities
- Salaries (owners and permanent staff)
- Insurance, licenses, subscriptions
- Equipment depreciation
- Loan payments
Variable costs increase proportionally with production or sales:
- Materials and ingredients
- Packaging
- Shipping and fulfillment
- Sales commissions
- Payment processing fees
Margin of Safety
The margin of safety tells you how much sales can drop before you hit break-even — a crucial risk metric:
If the bakery sells 280 cakes/month and break-even is 200 cakes: margin of safety = (280−200)/280 = 28.6%. Sales can drop 28.6% before the business operates at a loss.
Break-Even Analysis for Pricing Decisions
Break-even analysis answers critical pricing questions:
- If I lower my price by 10%, how many more units must I sell to break even?
- If I raise my price by 15%, how many fewer units can I sell and still be profitable?
- What is the minimum price I can charge to cover all costs at my expected sales volume?
These decisions are much clearer when you know your contribution margin and break-even point.
⚖️ Find your break-even point instantly with our free calculator.
Open Break-Even Calculator →Frequently Asked Questions
What is contribution margin?
Contribution margin is the selling price minus variable cost per unit — the amount each unit "contributes" toward covering fixed costs and generating profit. A higher contribution margin means fewer units are needed to reach break-even.
How do I include multiple products in break-even analysis?
For businesses with multiple products, calculate a weighted average contribution margin based on your expected sales mix, then apply the break-even formula using that weighted average. Alternatively, analyze break-even for each product line separately and sum the fixed cost coverage each needs to contribute.
Is break-even analysis only useful for new businesses?
No. Established businesses use break-even analysis when evaluating price changes, launching new products, adding staff, taking on new rent, or assessing the impact of cost increases. It is one of the most practical tools in managerial accounting.