Break-Even Point Calculator

Before you open a shop, launch a product or sign a lease, one question matters more than most: how much do I have to sell before I stop losing money? Break-even analysis answers it with three numbers, and it is simple enough to check on the back of an envelope. This page does the arithmetic, adds a profit target and a margin of safety, and prints a table that shows the loss turning into profit as volume grows.

The method

Each unit you sell brings in a price and costs you a variable amount to make or deliver. The difference is the contribution: what the unit adds towards paying the fixed costs. Break-even volume is the fixed costs divided by that contribution. The contribution margin ratio, contribution divided by price, tells you what share of each sale is left after variable costs, and the break-even revenue is the fixed costs divided by that ratio.

What you enter

The required boxes are fixed costs for the period, the selling price per unit and the variable cost per unit. Two optional boxes add more: the profit you want in the period and the units you sell now. Use one period for everything: if rent is monthly, the answer is a monthly volume. The currency selector changes only the symbol.

A worked example

The default is a business with 12,000 of fixed costs selling at 25 with a variable cost of 10. The contribution is 15 a unit, a ratio of 60.00%, and the break-even point is exactly 800 units, or 20,000 of revenue. The table shows a loss of 12,000 at zero sales, a loss of 6,000 at 400 units, zero at 800, and a profit of 12,000 at 1,600. The coffee cart sample has fixed costs of 4,500, a cup at 4 and a variable cost of 1.20. The contribution is 2.80 and the ratio 70.00%. Break-even is 1,607.14 units, rounded up to 1,608, with revenue of 6,432. A profit target of 2,000 needs 2,322 units and 9,288 of revenue. At the current 2,200 units the profit is 1,660 and the margin of safety is 26.95%. The online course sample has 20,000 of fixed costs, a price of 99 and a variable cost of 9. It breaks even at 223 units, or 22,077.

Margin of safety

If you enter the units you sell now, the page shows the profit at that level and the margin of safety. A margin of 26.95% means sales could fall by about a quarter before the business loses money. A figure that is “none” with a number of units below break-even tells you how far you still have to go. A thin margin of safety is a warning even when the month is profitable, because one slow month can erase it.

Edge cases

If the price is not higher than the variable cost, the page explains that no volume can cover the fixed costs, rather than printing an infinite answer. Zero fixed costs gives a break-even of zero units. Decimals in price and cost are fine. The five rows of the table are multiples of the rounded break-even, so a break-even of a single unit produces rows that repeat.

Limits

The model assumes that price and variable cost stay the same at every volume, which is only true within a normal range. Discounts for large orders, overtime when you are busy and extra rent when you outgrow a space all change the picture, and the page does not model them. It also assumes you sell one product, or an average product. For a mix of products, use the average price and average variable cost weighted by how many of each you sell.

Related tools

• Markup vs Margin Calculator sets the price that makes the contribution work.
• Profit Margin Calculator checks the margin on a single sale.
• ROI Calculator measures the return on the money you put in.
• E-Commerce Profit Calculator lists every cost an online order carries.