Break-Even Calculator – How Many Sales Cover Your Costs
The break-even point is the sales volume at which a business makes neither a profit nor a loss. Below it, each period ends in the red; above it, every extra sale adds profit. This break-even calculator works it out in units, in sales revenue and per day, for a single product, a business that only tracks total sales, or a mix of products.
The break-even formula
Break-even needs two numbers: your fixed costs for the period and the contribution each sale makes.
Break-even units = Fixed costs ÷ Contribution margin per unit
Break-even sales = Fixed costs ÷ Contribution margin ratioSay rent, wages, insurance, software and depreciation come to 9,050 a month. You sell at 40, materials and packaging cost 13.50 and card fees take 3% (1.20). Each sale contributes 40 − 14.70 = 25.30, so you need 9,050 ÷ 25.30 = 357.71, or 358 units a month. That is 14,308.30 in sales, or about 12 sales a day over 30 days.
Fixed costs vs variable costs
Fixed costs stay the same whatever you sell: rent, salaried staff, insurance, subscriptions. Variable costs rise with every sale: materials, stock, packaging, card fees, commission. Getting this split right matters more than any formula. If you pay staff a fixed wage but enter wages as a percentage of sales, your contribution margin looks smaller and your break-even looks higher than it really is. If break-even should mean you get paid too, add your own salary as a fixed cost.
Contribution margin: what each sale chips in
The contribution margin is what's left from each sale once the costs of that sale are paid. Until fixed costs are covered, every sale's contribution goes towards them; after break-even, it all becomes profit. The contribution margin ratio is the same thing as a share of the price (25.30 ÷ 40 = 63.25%), which is what you need when you sell many items at different prices.
Reading the break-even chart
The chart plots total revenue and total costs against volume. Costs start at your fixed costs, not at zero, and climb by the variable cost of each unit. Revenue starts at zero and climbs faster. Where the lines cross is break-even: the shaded wedge before it is loss and the wedge after it is profit. The Profit view shows the same story as one line that starts at minus your fixed costs, and the Cost per unit view shows how the true cost of each unit falls as fixed costs are spread over more sales.
Margin of safety and operating leverage
The margin of safety is how far sales can fall before you hit break-even. Selling 500 units against a break-even of 357.71 gives a margin of safety of 142.29 units, or 28.46%. The degree of operating leverage (contribution ÷ profit) shows how strongly profit reacts to sales. At 12,650 ÷ 3,600 = 3.51×, a 10% swing in sales moves operating profit by about 35%. High leverage is great when sales grow and painful when they fall.
Why price is usually the biggest lever
The sensitivity chart tests a 10% change in price, per-unit costs and fixed costs. In the example, a 10% price cut pushes break-even from 358 to 423 units (+18.11%), while a 10% cut in per-unit costs only brings it down to 340 (−5.07%). A price change flows straight into contribution, and when contribution is thin, a small change to it moves break-even a lot. Use the markup calculator or the profit margin calculator to set prices that keep enough contribution per sale.
Break-even for a sales mix
With several products, break-even depends on the mix. The calculator weights each product's contribution by its share of sales and splits the answer back into units of each product. Shifting the mix towards products with a bigger contribution per unit lowers the units you need, while shifting towards a higher contribution ratio lowers the sales revenue you need; the two don't always move together.