How do you calculate the break-even point?

Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit). Break-Even Revenue = Fixed Costs ÷ Contribution Margin Ratio. Example: $20,000 fixed costs, $50 selling price, $20 variable cost: Break-Even = $20,000 ÷ $30 = 667 units; revenue = $33,333.

What is contribution margin?

Contribution Margin per Unit = Selling Price − Variable Cost per Unit. It's the amount each unit sold contributes toward covering fixed costs and then generating profit. A $100 product with $40 variable cost has a $60 contribution margin — each sale 'contributes' $60 toward fixed costs.

What is a good break-even period?

There's no universal standard — it depends on industry, startup costs, and capital structure. Retail and food service businesses typically need to break even within 2–3 years. SaaS startups may target break-even at the unit economics level (positive LTV:CAC) from day one, while accepting operating losses during the growth phase.

How does raising prices affect the break-even point?

Raising price increases contribution margin per unit, which lowers the break-even unit count. If you raise price from $50 to $60 with $20 variable cost: CM goes from $30 to $40. Break-even at $15,000 fixed costs drops from 500 units to 375 units — 25% fewer sales needed.

Can a business break even with zero profit?

Yes — that's exactly what break-even means. At the break-even point, total revenue equals total costs (fixed + variable). Zero accounting profit. Many businesses use break-even analysis to determine minimum pricing, minimum sales volume, or whether a new product line makes economic sense.

Break-Even Calculator: How to Calculate Your Break-Even Point

Calculate your break-even point in units and revenue. Covers fixed costs, variable costs, contribution margin, and how changing prices or costs shifts your break-even.

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The Break-Even Formula

The break-even point is the level of sales at which total revenue equals total costs — neither profit nor loss.

Break-Even (units) = Fixed Costs ÷ Contribution Margin per Unit

Break-Even (revenue) = Fixed Costs ÷ Contribution Margin Ratio

Where: - Contribution Margin per Unit = Selling Price − Variable Cost per Unit - Contribution Margin Ratio = Contribution Margin per Unit ÷ Selling Price

Worked Example

A small manufacturer sells a product for $80 per unit with variable costs of $30 per unit and fixed monthly costs of $25,000.

Contribution Margin per Unit: $80 − $30 = $50
Contribution Margin Ratio: $50 ÷ $80 = 62.5%
Break-Even (units): $25,000 ÷ $50 = 500 units/month
Break-Even (revenue): $25,000 ÷ 0.625 = $40,000/month

At 500 units sold and $40,000 in revenue, total fixed costs ($25,000) + total variable costs (500 × $30 = $15,000) = $40,000 = Revenue. Zero profit, zero loss.

Fixed vs. Variable Costs

Getting the cost classification right is essential for an accurate break-even calculation:

Fixed costs — don't change with volume: - Rent and utilities - Salaries (salaried employees, not commission-only) - Insurance premiums - Loan payments and equipment leases - Software subscriptions

Variable costs — change proportionally with volume: - Raw materials and components - Direct labor (if hourly and tied to production) - Sales commissions (per-unit or percentage of revenue) - Shipping and fulfillment costs - Credit card processing fees

Some costs are semi-variable (fixed up to a point, then step up): a warehouse that's adequate until you hit 1,000 units/month, then requires a larger space. Handle step costs by building a model for each capacity tier rather than using a single break-even formula.

Break-Even for Multiple Products

When a business sells multiple products with different margins, the break-even is calculated using the weighted average contribution margin:

Weighted CM per Unit = Σ (CM per Product × % of Sales Mix)

Example: Two products, sold 60%/40%:

Product	Price	Variable Cost	CM	Sales Mix	Weighted CM
A	$100	$40	$60	60%	$36
B	$60	$25	$35	40%	$14
Weighted Average					$50

Break-Even = $30,000 fixed costs ÷ $50 = 600 units (360 of Product A, 240 of Product B).

Break-Even for SaaS Businesses

SaaS break-even analysis differs because the "unit" is a subscription customer:

Revenue per unit = monthly subscription price
Variable cost per unit = COGS per customer (hosting, support allocated per customer)
Fixed costs = R&D, S&M, G&A

SaaS break-even is usually expressed in terms of MRR needed to cover monthly fixed costs, at the company's gross margin:

Break-Even MRR = Monthly Fixed Operating Costs ÷ Gross Margin %

A SaaS company with $200,000 monthly fixed expenses (S&M, R&D, G&A) and 75% gross margin needs: $200,000 ÷ 0.75 = $266,667 MRR to break even operationally.

How the Calculator Works

Enter your fixed costs, selling price per unit, and variable cost per unit. The calculator outputs: - Contribution margin per unit - Contribution margin ratio - Break-even units - Break-even revenue

Use the margin of safety output (if available) to see how far actual sales exceed the break-even — a buffer that quantifies how much sales can decline before losses begin.

Related Guides

Frequently Asked Questions

How do you calculate the break-even point?: Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit). Break-Even Revenue = Fixed Costs ÷ Contribution Margin Ratio. Example: $20,000 fixed costs, $50 selling price, $20 variable cost: Break-Even = $20,000 ÷ $30 = 667 units; revenue = $33,333.
What is contribution margin?: Contribution Margin per Unit = Selling Price − Variable Cost per Unit. It's the amount each unit sold contributes toward covering fixed costs and then generating profit. A $100 product with $40 variable cost has a $60 contribution margin — each sale 'contributes' $60 toward fixed costs.
What is a good break-even period?: There's no universal standard — it depends on industry, startup costs, and capital structure. Retail and food service businesses typically need to break even within 2–3 years. SaaS startups may target break-even at the unit economics level (positive LTV:CAC) from day one, while accepting operating losses during the growth phase.
How does raising prices affect the break-even point?: Raising price increases contribution margin per unit, which lowers the break-even unit count. If you raise price from $50 to $60 with $20 variable cost: CM goes from $30 to $40. Break-even at $15,000 fixed costs drops from 500 units to 375 units — 25% fewer sales needed.
Can a business break even with zero profit?: Yes — that's exactly what break-even means. At the break-even point, total revenue equals total costs (fixed + variable). Zero accounting profit. Many businesses use break-even analysis to determine minimum pricing, minimum sales volume, or whether a new product line makes economic sense.

Last updated 7/28/2026