Break-Even Point Calculator
Determine exactly how many units you need to sell to cover your costs.
Break-Even Analysis Results
To break even, you must sell:
Break-even Sales Revenue:
Understanding the Break-Even Point (BEP)
The Break-Even Point (BEP) is a fundamental financial metric for business owners, entrepreneurs, and project managers. It represents the specific point where total costs and total revenues are equal, meaning your business is making exactly $0 in profit—but also $0 in losses. Every unit sold beyond this point contributes directly to your profit margin.
The Break-Even Formula
Calculating your break-even point is mathematically straightforward but provides deep insights into your business's viability. The formula used by this calculator is:
Key Components of the Calculation
- Fixed Costs: These are expenses that remain constant regardless of how many units you sell. Examples include office rent, administrative salaries, insurance, and equipment leases.
- Selling Price per Unit: The amount of money you receive for every individual unit of product or service sold.
- Variable Cost per Unit: These costs fluctuate in direct proportion to your production volume. Examples include raw materials, packaging, and direct shipping costs.
- Contribution Margin: This is the difference between the Selling Price and Variable Cost. It is the "leftover" money from each sale that goes toward paying off your Fixed Costs.
Example Calculation
Imagine you are starting a custom t-shirt business:
- Fixed Costs: $2,000 per month (Rent and Marketing)
- Selling Price: $25 per shirt
- Variable Cost: $10 per shirt (Blank shirt and printing)
Step 1: Calculate Contribution Margin: $25 – $10 = $15.
Step 2: Divide Fixed Costs by Margin: $2,000 / $15 = 133.33.
In this scenario, you must sell 134 shirts every month to cover all your expenses and start making a profit.
Why Is This Important?
Performing a break-even analysis helps you set realistic sales targets, price your products correctly, and understand the impact of changing your costs. If your break-even point is higher than your maximum production capacity, your business model may need adjustment—either by increasing prices or finding ways to reduce variable costs.