Break-even calculator
Fixed costs divided by contribution margin per unit. It is the simplest number in business, and the one most often skipped — which is why so many plans depend on volumes nobody checked.
Fixed, variable and contribution
- Fixed costs do not change with the number of units sold in the period: rent, salaried labour, insurance, software subscriptions, loan repayments, minimum marketing spend.
- Variable costs move with each unit: materials or landed cost, payment processing, packaging, outbound shipping, platform commission, per-unit licence fees.
- Contribution per unit = price − variable cost. This is what each sale adds towards covering fixed costs, and eventually towards profit.
- Break-even point = fixed costs ÷ contribution per unit, rounded up to a whole unit.
Two useful pieces of intuition fall out of that arithmetic. First, improving price by one unit of currency does more for break-even than saving the same amount on a variable cost, because price flows straight into contribution. Second, reducing fixed costs lowers the bar immediately, which is why trimming subscriptions and renegotiating rent can be faster than selling harder.
How to use the answer
- Compare it to your current pace. If break-even needs 17 units a day and you currently sell 6, the gap is not a marketing detail — it is the central fact of the business.
- Test the levers one at a time. Change only the price, then only the variable cost, then only fixed costs. You will usually find that one lever moves the break-even point far more than the others.
- Re-run it when anything structural changes. A new hire, a rent increase, a freight rate change or a platform commission change all move this number.
- Use it for order decisions. A large order at a lower price can still be worth taking if the contribution per unit is positive and the volume helps you clear fixed costs — but only if you have the capacity and the cash flow to deliver it.
What break-even analysis hides
Three things, all worth keeping in mind:
- Cash timing. Break-even is an accounting view. If customers pay in 60 days and you pay suppliers in 30, you can be past break-even and still short of cash — see the 13-week cash flow playbook.
- Step changes. Fixed costs are only fixed within a range. Doubling sales may require another hire or a bigger space, which moves the bar you are aiming at.
- Mix. With several products, a single break-even figure blends different margins together. Run the calculation per product line when the margins differ substantially.
Frequently asked questions
What is contribution margin?
It is the selling price minus the variable cost of that unit — the amount each sale contributes towards paying fixed costs. Once enough units have been sold to cover fixed costs, every additional sale contributes that whole amount to profit. It is a more useful number than gross margin when you are deciding whether to take on a large order.
Does break-even include my own salary?
It should. If the business is meant to support you, your salary is a fixed cost of the business, not a distribution of profit. Leaving it out produces a break-even figure that is comfortably met while you still cannot pay yourself — a common and demoralising discovery.
What if my contribution margin is negative?
Then selling more makes things worse, and no volume will fix it. A negative contribution means the variable cost of the unit exceeds the price — usually a pricing problem, a discount that has gone too far, or a cost that was never correctly allocated. Fix that before looking at volume.
Is break-even the same as a profit target?
No. Break-even covers fixed costs; a profit target adds the profit you want on top. The calculator shows both, plus the difference between them as a margin of safety — how much the target can fall short and still keep you above the break-even line.