Find how many units you need to sell, and how much revenue you need, to cover your fixed and variable costs, plus the sales needed to reach a profit target.
What is the break-even point?
The break-even point is the sales level at which total revenue equals total costs, so you make neither a profit nor a loss. Every unit sold above it adds profit.
Contribution margin = price − variable cost per unit
Break-even units = fixed costs ÷ contribution margin
Units for a profit target = (fixed costs + target profit) ÷ contribution margin
Fixed versus variable costs
- Fixed costs stay the same whatever you sell: rent, salaries, insurance, software subscriptions.
- Variable costs rise with each unit: materials, packaging, shipping, payment fees, sales commission.
Worked example
Monthly fixed costs are $12,000. Each product sells for $50 and costs $30 to make and ship, a contribution margin of $20. The break-even point is $12,000 ÷ $20 = 600 units, or $30,000 in sales a month. To earn a $5,000 profit, you need to sell 850 units.
How to lower your break-even point
- Raise prices, if customers will accept it. This increases the contribution margin of every unit.
- Cut variable costs with better suppliers or packaging.
- Reduce fixed costs or delay hiring until sales justify it.
Frequently asked questions
What if I sell several products?
Use a weighted average price and variable cost based on your expected sales mix.
Why round up the units?
You cannot sell part of a unit, so you need the next whole unit to actually cover costs.
Related tools
Results are estimates for planning and education. They are not accounting, tax or legal advice. Check important figures with a qualified accountant.