Break-Even Point Calculator
Find the exact number of units — and revenue — you need to cover your costs, plus your margin of safety and units required to hit a profit target.
Break-even analysis
How to use break-even analysis
Break-even isn't just an accounting exercise — it's a fast reality-check for any pricing or product decision. Here's how each output helps:
Break-even units
The formula is fixed costs ÷ contribution margin per unit. If your fixed costs are £10,000/month and each unit contributes £30 after variable costs, you need to sell 334 units just to break even. If your realistic sales are 200, this product will lose money at these prices — you need to raise prices, cut variable costs, or reduce fixed overhead.
Contribution margin ratio (%)
The fraction of every sales dollar left after paying variable costs. A 60% ratio means for every $100 in revenue, $60 goes toward fixed costs and profit. High-ratio businesses (software, consulting) scale fast once past break-even; low-ratio businesses (grocery retail, restaurants) need volume.
Margin of safety
How far current sales exceed break-even. A margin of 25% means sales could fall a quarter before you're in the red — comfortable. A margin below 10% is a warning: one bad quarter and you're losing money.
Units for target profit
Instead of just breaking even, add your desired profit to the numerator: (fixed costs + target profit) ÷ contribution margin. This turns break-even into a goal-setting tool: "we need to sell 500 units to make £15,000 profit — is that realistic?"
Common mistakes
- Ignoring your own salary. If you're the founder, your salary is a fixed cost. Otherwise you're subsidising the business and calling it profit.
- Confusing markup and margin. A 50% markup is a 33% margin. Use our markup calculator to convert.
- Forgetting payment processor fees. Stripe/PayPal fees (~2.9% + 30p) are variable costs — subtract them per unit.
- Static analysis. Break-even assumes prices and costs stay flat. Run it again every quarter and after any major supplier or pricing change.
Related tools
- Markup & margin calculator — set the right price to hit your target margin
- ROI calculator — measure return on invested capital
- VAT calculator — work out what price to charge including tax
FAQ
What is the break-even point?
It's the sales volume where total revenue equals total cost — you're neither making a profit nor a loss. Below break-even, you lose money; above it, every additional unit's contribution margin becomes profit. It's the single most useful number when validating a new product or pricing decision.
What's contribution margin?
Contribution margin = price per unit − variable cost per unit. It's the amount each unit contributes to covering fixed costs (and, past break-even, to profit). If a coffee sells for £4 and costs £1.20 in beans/milk/cup, your contribution margin is £2.80.
How do I know which costs are 'fixed' vs 'variable'?
Fixed costs don't change with sales volume in the short run — rent, salaries, insurance, subscriptions. Variable costs scale directly with each unit sold — raw materials, packaging, credit-card fees, shipping. Some costs are mixed (e.g. electricity has a base fee plus per-usage charge) — split them if it materially affects the answer.
What's a 'margin of safety'?
It's how much your sales could drop before you'd start losing money. If you're at 800 units and break-even is 500, your margin of safety is 300 units or 37.5%. High margins of safety mean the business can weather a slow month; low margins mean any dip pushes you into the red.