Find the sales volume you need to cover all your costs — the point where your business neither makes nor loses money.
Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit)
The denominator here is your "contribution margin per unit" — how much each sale contributes toward covering fixed costs after accounting for the variable cost of producing that unit. Once you've sold enough units to cover all fixed costs, every additional unit sold becomes pure profit (minus its own variable cost).
The break-even point is the sales volume (in units or revenue) at which your total revenue exactly equals your total costs — beyond this point, every additional sale contributes to profit.
Fixed costs (rent, salaries, insurance) stay the same regardless of how much you sell. Variable costs (materials, packaging, per-unit shipping) scale directly with sales volume. Break-even analysis depends on correctly separating these two.
Contribution margin is the selling price per unit minus the variable cost per unit — it represents how much each unit sold "contributes" toward covering fixed costs and, beyond break-even, toward profit.
You can lower it by reducing fixed costs, reducing variable costs per unit, or increasing your selling price — any of these increases your contribution margin or reduces the volume needed to cover fixed costs.
Knowing your break-even point is fundamental before launching a product or business — it tells you exactly how many units you need to sell before you start making a profit, and helps you judge whether a given price point and cost structure is realistic for your expected sales volume.
Once you know your numbers here, use our Pricing Calculator to fine-tune your selling price, or our Cash Flow Calculator to project your monthly cash position.
