In Short
Break-even units = fixed costs ÷ (price − variable cost per unit) [1]. With $8,000 of monthly fixed costs, a $50 price and a $20 variable cost, each sale contributes $30, so you break even at 267 units ($13,333 in sales) a month. To earn a $3,000 profit you'd need 367 units.
How to Use the Break-Even Calculator
- Pick what you sell: products (units) or services (billable hours).
- Enter your monthly fixed costs: rent, salaries, insurance, software.
- Enter your price and the variable cost that comes with each unit or hour.
- Optionally add a monthly profit target, and for services the hours you can bill.
- Or tap Say It All: “My fixed costs are 8,000 a month, I sell at 50 dollars, the variable cost is 20 per unit, and I want a profit of 3,000.”
The Formula
Each sale first pays its own variable cost. What's left, the contribution margin, goes toward fixed costs. Once enough sales have covered the fixed costs, every extra sale is profit.
- Contribution margin = price − variable cost per unit
- Break-even units = fixed costs ÷ contribution margin
- Break-even sales = fixed costs ÷ (contribution margin ÷ price)
- Units for a profit target = (fixed costs + target profit) ÷ contribution margin
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| Product business | Fixed costs $8,000/mo, price $50, variable cost $20 | 267 units ($13,333 in sales) to break even · 367 units for a $3,000 profit |
| Consultant or agency | Fixed costs $6,000/mo, rate $100/hour, variable cost $25/hour | 80 billable hours ($8,000) a month to break even |
| Coffee shop | Fixed costs $12,000/mo, $5 drink, $1.50 to make | 3,429 drinks ($17,143) a month, about 115 a day |
| Priced below cost | Price $20, variable cost $22 | No break-even: each sale loses $2, so more sales mean bigger losses |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
What Is a Break-Even Point?
It's the point where total revenue equals total costs, so you make no profit and take no loss [1]. Below it you lose money each month; above it you earn a profit on every extra sale.
The SBA's business guide uses the same formula: fixed costs divided by price minus variable costs gives the break-even point in units [1]. Investors and lenders often ask for it in a business plan, because it shows when a business starts paying for itself [2].
What Counts as a Fixed Cost vs a Variable Cost?
Fixed costs stay the same whether you sell a lot or a little: rent, salaries, insurance and depreciation are the SBA's examples [1]. Variable costs rise with each sale: materials, packaging, shipping, card fees, or a contractor you pay by the hour.
Some costs are semi-variable: flat up to a point, then they jump (a second shift, a bigger space) [1]. If selling more would push one of those up, add the new amount to fixed costs and run the numbers again.
How Do Service Businesses Find Their Break-Even?
Swap units for billable hours. Your hourly rate is the price, and anything you pay per hour worked (subcontractors, supplies, platform fees) is the variable cost. Divide fixed costs by what's left per hour.
Then compare the answer with the hours you can actually bill. If break-even takes 150 hours and one person can bill about 120, the gap has to close through a higher rate, lower fixed costs or more people.
How Can a Business Lower Its Break-Even Point?
There are three levers: raise the price, cut the variable cost per sale, or cut fixed costs. A price increase often moves it most, because every dollar of it goes straight to the contribution margin. Try each one in the calculator to see the effect, and pair it with the Profit Margin Calculator to check your pricing.
Frequently Asked Questions
How do I calculate my break-even point?
Divide your monthly fixed costs by your contribution margin (price minus variable cost per unit). $8,000 of fixed costs ÷ ($50 − $20) = 267 units a month [1].
How do I calculate break-even in sales dollars?
Divide fixed costs by the contribution margin ratio (contribution margin ÷ price). With $8,000 of fixed costs and a 60% ratio, break-even sales are $8,000 ÷ 0.60 = $13,333 a month [1].
How many sales do I need to make a $5,000 profit?
Add the profit to your fixed costs, then divide by the contribution margin. With $8,000 of fixed costs and a $30 margin: ($8,000 + $5,000) ÷ $30 = 434 units a month.
What if my price is lower than my variable cost?
Then there's no break-even point: each sale loses money, so selling more makes the loss bigger. The price has to rise above the variable cost before volume can help.
How many billable hours do I need to break even?
Divide fixed costs by your hourly rate minus the variable cost per hour. $6,000 of fixed costs at $100 an hour with $25 of hourly costs is $6,000 ÷ $75 = 80 hours a month.
Sources
- Calculate your startup costs (break-even point) — U.S. Small Business Administration
- Write your business plan — U.S. Small Business Administration
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.