Break-even Calculator
Find the sales volume and revenue you need to cover your fixed and variable costs. Essential for any small business or product launch.
Written by Rahman · Last reviewed
Quick answer
Break-even units = fixed costs ÷ (price per unit − variable cost per unit). That denominator is the contribution margin, the amount each sale contributes toward covering fixed costs. A thin margin makes break-even highly sensitive to price: a small increase can cut the required sales volume dramatically.
- Fixed costs5,000.00 (57.1%)
- Total variable costs3,750.00 (42.9%)
- Total8,750.00
Results are estimates for general guidance and are not financial, tax or legal advice. Except where a calculator names a currency, figures carry no currency of their own: put in pounds and you get pounds back, put in rupees and you get rupees. Figures depend on the assumptions you enter and on rates that change over time. Check current rates and speak to a qualified adviser before acting on them.
About the Break-even Calculator
The break-even point is the level of sales at which total revenue exactly equals total cost, the moment a business stops losing money and starts contributing to profit. Below it you are subsidising the business; above it, every additional unit sold is genuine profit.
This calculator uses the classic contribution-margin approach: fixed costs divided by the contribution per unit (selling price minus variable cost). It works for any product or service business, from a single-product launch to a freelance consultant pricing their first engagement.
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit)
Contribution per unit is the part of each sale that goes toward covering fixed costs. Once fixed costs are covered, contribution becomes profit.
Classifying the costs is the hard part
The arithmetic of break-even is trivial. The work is deciding which costs are fixed and which vary with volume, and that is where most break-even calculations go wrong, because a large share of real costs are neither cleanly.
Semi-variable costs are the problem. A delivery van has a fixed lease and variable fuel. Staff are fixed until volume requires another shift, then they step up. Utilities have a standing charge and a usage element. Forcing these into one bucket or the other is a judgement, and the answer moves with it.
- Fixed costs are fixed only within a range of output. Past the point where you need a second machine or a larger unit, they step up: a stepped fixed cost, not a flat one.
- Costs already spent are not part of the decision. Break-even looks forward at costs that will still be incurred.
- The owner's own time is a real cost. Excluding it from a small business calculation produces a break-even point the business cannot actually live at.
Contribution margin is the number that moves the answer
Break-even is fixed costs divided by contribution margin, the amount each sale contributes after its own variable costs. Because the margin is the denominator, small changes to it move the break-even point more than equivalent changes to fixed costs do.
On £60,000 of fixed costs, a £50 product with £30 of variable cost has a £20 margin and breaks even at 3,000 units, or £150,000 of revenue. If variable costs rise to £35 the margin falls to £15 and break-even rises to 4,000 units, a 17% cost increase requiring a 33% increase in volume to stand still.
- Raising price lifts the margin directly, which is why a small price increase can beat a large volume push, provided demand holds.
- Discounting cuts the margin and raises break-even. A 10% discount on a 40% margin requires substantially more volume simply to match the previous profit.
- The model assumes price and unit cost hold constant across all volumes. Real businesses see both change with scale, so treat the output as a planning benchmark rather than a forecast.
Frequently Asked Questions
What counts as a fixed cost?
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Anything you must pay regardless of how many units you sell: rent, salaries, insurance, software subscriptions, equipment depreciation. They stay roughly the same whether you sell 10 units or 1,000.
What counts as a variable cost?
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Costs that scale with each unit sold: materials, packaging, shipping, payment-processing fees, per-unit labour. If selling more units doesn't increase the cost, it's fixed, not variable.
What if my variable cost is higher than my price?
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You lose money on every sale and selling more makes the loss bigger. You cannot break even at any volume. Raise the price or lower the variable cost before scaling.
What is the contribution margin ratio?
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The percentage of each sale's price that goes toward fixed costs. A 60% ratio means 60 cents of every $1 sold contributes to covering fixed costs; the remaining 40 cents is variable cost.