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Break-even calculator
Find your break-even point in units and revenue. Read profit at six different sales volumes to see how the line moves.
Calculate break-even point
Method
How break-even analysis works
Break-even point
The break-even point is where total revenue equals total costs. No profit, no loss. It tells you the minimum number of units you need to sell to cover all costs.
Break-Even Units = Fixed Costs / (Price per Unit - Variable Cost per Unit)
Contribution margin
The amount each unit sale contributes toward covering fixed costs and generating profit.
Contribution Margin = Price per Unit - Variable Cost per Unit
The contribution margin ratio expresses this as a percentage of the selling price. A higher ratio means each sale covers more fixed costs.
Break-even revenue
You can also express the break-even point in revenue dollars:
Break-Even Revenue = Fixed Costs / Contribution Margin Ratio
This is useful when selling multiple products at different price points, or when you think in total sales rather than unit volumes.
Questions
Frequently asked
- What are fixed costs vs variable costs?
- Fixed costs remain constant regardless of production volume (rent, salaries, insurance). Variable costs change with each unit produced (materials, direct labor, shipping). Understanding this distinction is essential for accurate break-even analysis.
- How do I lower my break-even point?
- You can lower your break-even point by: reducing fixed costs (renegotiate rent, automate processes), reducing variable costs per unit (bulk purchasing, efficient production), or increasing your selling price. Each approach has trade-offs to consider.
- What is a good contribution margin ratio?
- Contribution margin ratios vary widely by industry. Software/SaaS often sees 80-90%, retail 30-50%, and manufacturing 20-40%. Higher ratios mean faster break-even and more profit per sale after fixed costs are covered.
- Can break-even analysis work for services?
- Yes. For services, your 'unit' is typically a billable hour, project, or client. Fixed costs include overhead (office, software, salaries), and variable costs include direct delivery costs. The formula works the same way.
- What are the limitations of break-even analysis?
- Break-even analysis assumes costs are strictly fixed or variable (some are mixed), prices stay constant at all volumes, and you sell everything you produce. It is a useful starting point but should be combined with other financial analysis for complex decisions.
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