Break-Even Calculator
Calculate exactly how many units you need to sell to cover all your costs. See your contribution margin and a profitability table showing profit at different sales volumes.
Rent, salaries, insurance, etc.
Selling price of one unit
Cost of goods, shipping, etc.
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Understanding Break-Even Analysis
Break-even analysis is one of the most practical financial tools for any business. It answers a simple but critical question: how many units do I need to sell before I start making money? This number is essential for pricing decisions, sales targets, and evaluating whether a business model is viable.
The Break-Even Formula
Break-Even Units = Fixed Costs / (Price per Unit - Variable Cost per Unit). The difference between price and variable cost is your contribution margin — the amount each sale contributes toward covering your fixed costs. Once you've sold enough units to fully cover fixed costs, every additional unit sold is pure profit.
Why Break-Even Matters for Market Entry
When entering a new market, break-even analysis helps you understand the minimum viable sales volume. If you need to sell 10,000 units to break even but the market only has 5,000 potential buyers, the opportunity may not be viable at your current cost structure. This is where market sizing data becomes essential — understanding the total addressable market helps validate whether your break-even target is achievable.
Using Break-Even for Pricing
Try different price points in the calculator to see how they affect your break-even volume. A higher price means fewer units needed to break even, but may reduce demand. A lower price requires more volume but may capture more market share. Finding the optimal balance is key to profitable growth.
Frequently Asked Questions
- What is the break-even point?
- The break-even point is the sales volume at which total revenue equals total costs — meaning you neither make a profit nor incur a loss. Beyond this point, every additional sale generates profit. It is one of the most important financial metrics for any business.
- How do you calculate the break-even point?
- Break-Even Point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). The denominator is called the contribution margin — the amount each sale contributes toward covering fixed costs. Once enough units are sold to cover all fixed costs, you've broken even.
- What is contribution margin?
- Contribution margin is the difference between the selling price and the variable cost per unit. It represents how much each sale contributes to covering fixed costs and generating profit. A higher contribution margin means you need fewer sales to break even.
- What are fixed costs vs variable costs?
- Fixed costs remain constant regardless of sales volume — rent, salaries, insurance, subscriptions. Variable costs change proportionally with each unit sold — raw materials, shipping, sales commissions, payment processing fees. Understanding this distinction is critical for accurate break-even analysis.
- How can I lower my break-even point?
- You can lower your break-even point by: (1) reducing fixed costs (negotiate rent, cut unnecessary subscriptions), (2) increasing your selling price, (3) reducing variable costs per unit (better supplier rates, more efficient production), or (4) changing your product mix to favor higher-margin items.