Break-Even Calculator

What break-even actually means

Break-even is the point where your profit is exactly zero. Not the point where the business feels comfortable, and not the point where you are paid properly. Zero.

It comes from one equation, and everything on this page is that equation rearranged:

Set profit to zero and solve, and you get the number this calculator returns.

Two things fall straight out of that, and both are worth holding on to.

Fixed costs decide how far you have to climb. They do not change when you sell more, so they sit there as a hurdle until enough contribution has piled up to clear them.

Contribution margin decides how fast you climb. Each sale contributes that much toward the hurdle. Double it and you halve the units you need.

Everything else is detail.

Contribution margin, without the jargon

Most break-even calculators ask you for your contribution margin. That is a fair question to ask an accountant and a strange one to ask a business owner, because it assumes you already know a term you probably came here to avoid.

It is simpler than it sounds:

That is it. If you sell a coffee for $5.50 and the cup, lid, beans and milk cost you $1.85, your contribution margin is $3.65. Every coffee you sell puts $3.65 toward the rent.

The contribution margin ratio is the same figure as a percentage of price. On that coffee it is 66.4%, meaning about sixty-six cents in every dollar you take is available to cover fixed costs and then to become profit.

This calculator asks for price and variable cost and works the margin out for you. You never have to know the term to use the page.

Units or revenue, and which one you want

Use units mode if you sell a thing. Coffees, prints, boxes, seats, subscriptions. Anything you can count and put a single price on.

Use revenue mode if you sell your time or a mixed bag. A consultant, an agency, a repair shop, a restaurant with sixty menu items. There is no single unit to divide by, so instead of a price and a cost per unit you give one number: what share of each dollar of revenue goes straight back out as direct cost.

If for every $100 you invoice, $25 goes to contractors and software you only pay when the work happens, enter 25. Your margin ratio is 75%, and the calculator gives you a break-even in revenue rather than in units.

Revenue mode is the honest answer for most service businesses, and it is the mode almost every other calculator does not offer. Being forced to invent a “unit” for a consulting business produces a number that looks precise and means nothing.

Finding your fixed costs

Fixed costs are what you pay whether you sell one unit or a thousand, over whatever period you are working in. Pick a period and stay in it. A monthly break-even needs monthly fixed costs.

Usually fixed

• Rent and utilities
• Insurance
• Software subscriptions
• Salaries for people who are paid the same regardless of volume
• Accounting and legal retainers
• Loan repayments

Usually not fixed

• Materials and stock
• Payment processing fees
• Shipping
• Contractors paid per job
• Sales commission

The borderline cases are where people go wrong. A salaried employee is a fixed cost. The same person on hourly, called in when it is busy, is variable. A phone bill with a flat plan is fixed. One that scales with usage is partly both, and if the variable part is small, treat the whole thing as fixed and move on.

Do not chase perfection here. Break-even is a decision tool, not a tax return.

What counts as a variable cost

A variable cost is one you only incur because you made that particular sale. If the sale had not happened, you would not have paid it.

The test is simple: would this cost exist if I sold one fewer?

For a product, that is usually materials, packaging, the payment fee and the shipping. For a service, it is the contractor you bring in for that job, the per-seat software you add for that client, the travel you would not otherwise have made.

Two costs that get misfiled constantly. Payment processing fees are variable and people forget them, which quietly overstates the margin on every sale. And your own time, if you are the one doing the work, is usually not a variable cost in this model, because you are not paying yourself per unit. If you want to pay yourself properly, put your salary in fixed costs and watch the break-even move.

Hitting a profit target

Break-even tells you when you stop losing money. It does not tell you when the business is worth running.

Enter a profit target and the calculator answers the better question. The maths barely changes:

The target simply joins the fixed costs as part of the hurdle. On the coffee cart, break-even is 658 coffees a month. Add a $1,500 profit target and it becomes 1,069 coffees. That is 411 more, and 411 x $3.65 is $1,500, which is the arithmetic working exactly as it should.

Seeing both numbers together is usually more useful than either alone. Break-even tells you what survival costs. The target tells you what the plan costs.

When you never break even

Sometimes there is no answer, and that is the most valuable thing this page can tell you.

If your variable cost is at or above your price, your contribution margin is zero or negative. Every sale either contributes nothing or actively loses money. Selling more makes it worse, not better. No volume rescues it. The answer is not a bigger number, it is a different price or a lower cost.

This calculator distinguishes two situations that look the same and are not.

With fixed costs, there is genuinely no break-even. Sell a product for $18 that costs you $22 to make, with $1,500 of monthly fixed costs, and you lose money at every possible volume. There is no quantity that gets you to zero.

Without fixed costs, there technically is one, and it is zero sales. Same $18 price and $22 cost, but no fixed costs. Your break-even is selling nothing. Profit is zero when you do nothing and negative the moment you make a sale. That is mathematically true and it is not a business.

There is one more edge worth naming. If your price and variable cost are exactly equal and you have no fixed costs, profit is zero at every volume. You never make money and you never lose it. That is a hobby with paperwork.

Reading your results

Break-even units is rounded up to a whole unit, always. You cannot break even on 37.04 sales. At 37 you are still short, so the answer is 38.

That is why the number often clears your costs with a little to spare. In the worked example below, 38 units leaves $26 of profit and 37 leaves you $1 short. Thirty-eight is the honest answer.

Break-even revenue in units mode is what those rounded-up units bring in at your price. In revenue mode it is the revenue figure directly, with no rounding up, because revenue is continuous in a way that units are not.

Your contribution margin is shown in dollars per unit and as a percentage. The percentage is the one to watch over time. It tells you how much of each sale is actually yours before fixed costs.

The workings show every step, so you can check the result rather than trust it.

Common mistakes

Mixing periods. Monthly fixed costs with an annual profit target gives you nonsense. Pick a period and use it everywhere.

Forgetting payment processing fees. Two to three percent sounds trivial and it comes straight off the contribution margin on every single sale.

Putting your own salary in the wrong place. If you pay yourself a set amount, it is a fixed cost, and leaving it out means your break-even is the point where the business survives and you do not get paid.

Treating break-even as a target. It is a floor. It is the point at which you have achieved nothing.

Using units mode for a service business. Inventing an average job size to force a unit produces a precise-looking number built on a guess. Revenue mode exists for this.

Assuming break-even is when cash arrives. This is accounting profit, not cash flow. If customers pay in sixty days, you can be past break-even and still short of cash.

Worked examples

Every figure here was produced by the same engine that powers the calculator.

Example 1: a coffee cart

Fixed costs $2,400 a month. Price $5.50. Variable cost $1.85.

• Contribution margin: $3.65 per coffee, a 66.4% margin ratio
• Break-even: 658 coffees, which is $3,619 of revenue
• At 658 coffees the profit is $1.70. At 657 it is -$1.95

Roughly 22 coffees a day, every day, before the cart makes a penny.

Example 2: a product with a clean crossing

Fixed costs $1,000. Price $45. Variable cost $18.

• Contribution margin: $27, a 60% margin ratio
• The exact crossing is 37.04 units, so break-even is 38 units, which is $1,710
• At 38 units the profit is $26. At 37 it is -$1

This is the rounding rule doing its job. Thirty-seven units leaves you a dollar short.

Example 3: a consultant, revenue mode

Fixed costs $4,000 a month. Direct costs run at 25% of revenue.

• Margin ratio: 75%
• Break-even: $5,333.33 of revenue a month
• Add a $2,000 profit target and it becomes $8,000 of revenue

No units, no invented average project size, no guessing.

Example 4: a price that cannot work

Price $18, variable cost $22, fixed costs $1,500 a month.

• Contribution margin: -$4.00
• There is no break-even at any volume. Every sale increases the loss

The calculator says so plainly rather than returning a large and meaningless number.

Frequently asked questions

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