Business Break-Even Point Calculator
Calculate exactly how many units you need to sell to cover all business expenses.
Rent, salaries, insurance, utilities
What customers pay per item
Materials, shipping, direct labor
Optional: Profit goal above costs
Please ensure the Sales Price is higher than the Variable Cost.
Units to Break Even:
0
Sales Revenue Needed:
$0.00
Contribution Margin:
0%
Units for Target Profit:
0
What is the Break-Even Point (BEP)?
The break-even point is the specific moment where your total business revenue exactly equals your total expenses. At this point, your business is making zero profit, but it is also suffering zero losses. Every unit sold beyond this point contributes directly to your net profit.
The Break-Even Formula
To calculate the break-even point in units, we use the following formula:
Break-Even Units = Total Fixed Costs / (Price Per Unit – Variable Cost Per Unit)
Key Components of the Calculation
- Fixed Costs: These are expenses that do not change regardless of how much you sell. Examples include office rent, administrative salaries, insurance, and equipment leases.
- Variable Costs: These costs fluctuate directly with production volume. This includes raw materials, packaging, shipping fees, and sales commissions.
- Contribution Margin: This is the Sales Price minus the Variable Cost. It represents the amount of money from each sale that "contributes" to covering fixed costs.
Example Calculation
Imagine you run a candle business:
- Fixed Costs: $2,000 (Studio rent and website hosting)
- Sales Price: $25 per candle
- Variable Cost: $10 (Wax, wick, jar, and shipping)
Your contribution margin is $15 ($25 – $10). To find your break-even point: $2,000 / $15 = 133.33. You must sell 134 candles per month to start making a profit.
Why Entrepreneurs Need This Tool
Using a break-even calculator helps you make critical business decisions, such as:
- Pricing Strategy: If your break-even point is too high, you may need to raise prices.
- Cost Control: If you can't raise prices, you must find ways to lower your variable or fixed costs.
- Feasibility: Before launching a new product, you can see if the required sales volume is realistic based on market size.