Break-Even Calculator

How break-even analysis works

Break-even is the point where total revenue equals total cost. Below it you lose money, above it you make money. The formula is simple but powerful: it forces you to separate fixed from variable costs and to think in terms of contribution per unit.

The formula

Break-even units = Fixed costs / (Selling price - Variable cost per unit). The denominator is your contribution margin per unit: the money each sale contributes towards covering your fixed costs and then becoming profit.

What counts as fixed vs variable

• Fixed: rent, salaries, software, insurance, accountancy. These do not move with volume in the short run.
• Variable: COGS, payment fees, packaging, shipping, commission. These scale per unit sold.

Adding a profit target

To hit a profit target, add it to fixed costs in the numerator: Target units = (Fixed + Profit target) / Contribution per unit. This is how to translate a profit goal into a sales target you can actually plan against.

Limits of the model

Break-even assumes price and unit cost stay constant. In reality, both move with volume: bulk discounts on inputs, price promotions, and step changes in fixed cost when you hire the next person. Re-run the calculation for each scenario rather than treating one answer as gospel.