Break-Even Point Calculator
Determine the sales volume needed to cover your costs and start making a profit.
Rent, salaries, insurance, utilities (monthly/yearly).
Materials, packaging, direct labor per item.
Enter amount if you want to calculate sales needed for a specific profit.
Analysis Results
0
Units to Sell
$0.00
Revenue Required
$0.00
Contribution Margin / Unit
0%
Contribution Margin Ratio
Understanding Break-Even Analysis for Business Growth
Whether you are launching a startup, pricing a new product, or analyzing your current business model, knowing your Break-Even Point (BEP) is fundamental to financial survival. The break-even point represents the moment where your total revenue equals your total costs—meaning you are neither making a profit nor a loss.
How the Calculation Works
This calculator uses the standard Cost-Volume-Profit (CVP) formula to determine how many units you need to sell to cover your expenses. The logic relies on three core components:
- Fixed Costs: Expenses that remain constant regardless of how much you sell (e.g., rent, insurance, salaried payroll).
- Variable Costs: Expenses that fluctuate directly with production volume (e.g., raw materials, shipping, sales commissions).
- Selling Price: The amount you charge customers for one unit of your product or service.
The Break-Even Formula
The math behind the calculator determines the "Contribution Margin," which is the selling price minus the variable cost. This margin contributes to paying off your fixed costs. The formula is:
Break-Even Units = Total Fixed Costs / (Price per Unit – Variable Cost per Unit)
Why Contribution Margin Matters
The Contribution Margin is a critical metric displayed in the results above. If your margin is low, you must sell significantly more volume to cover your fixed overhead. If your margin is high, you can break even with fewer sales. Strategies to lower your break-even point include:
- Reducing fixed overhead (e.g., negotiating cheaper rent).
- Lowering variable costs (e.g., sourcing cheaper materials).
- Increasing the selling price (provided the market can sustain it).
Example Calculation
Imagine a coffee shop with the following finances:
- Fixed Costs: $3,000 per month (Rent + Salaries).
- Variable Cost: $1.00 per cup (Beans + Cup + Milk).
- Selling Price: $4.00 per cup.
First, calculate the contribution margin: $4.00 – $1.00 = $3.00 per cup.
Next, divide fixed costs by the margin: $3,000 / $3.00 = 1,000 cups.
This means the shop must sell 1,000 cups of coffee just to cover costs. Every cup sold after the 1,000th cup generates pure profit.