Most small business owners know their sales target. Far fewer know the exact point where the business finally stops losing money.
That number is your break-even point.
Use the calculator below to estimate how many units you need to sell—and how much revenue you need to generate—before your fixed and variable costs are covered.
Free Break-Even Calculator
Enter your fixed costs, selling price per unit, and variable cost per unit.
Fixed Costs ($)
Selling Price per Unit ($)
Variable Cost per Unit ($)
Note: This calculator is a simplified planning tool. Actual results can vary depending on taxes, financing costs, discounts, returns, product mix, and other business expenses.
What does break-even actually mean?
Break-even is the point where your total revenue covers your total costs.
You are not making a profit yet—but you are no longer losing money either.
That makes break-even one of the most useful numbers for pricing, sales planning, and deciding whether a new product or service makes sense.
The three numbers you need
The calculator uses three inputs:
1. Fixed costs
These are expenses that generally do not change just because you sell one more unit.
Examples can include rent, software subscriptions, insurance, certain salaries, equipment leases, and other recurring overhead.
2. Selling price per unit
This is the amount you charge the customer for one product, service unit, package, or billable item.
3. Variable cost per unit
This is the cost that changes as you sell more.
Examples might include inventory, packaging, materials, shipping, transaction fees, contractor labor, or commissions tied directly to each sale.
How the break-even formula works
Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit
Suppose your monthly fixed costs are $5,000.
You sell a product for $50, and each unit costs you $30 in variable expenses.
Your contribution margin is $20 per unit.
$5,000 divided by $20 means you need to sell 250 units to cover your fixed costs.
At a $50 selling price, that equals approximately $12,500 in revenue.
Why this number matters more than a random sales goal
“I want to make $20,000 this month” sounds like a goal.
But without understanding your costs, that number does not tell you whether $20,000 means a profitable month—or a month where you are still underwater.
Your break-even point gives the sales target some context.
If you know you break even at $12,500, then the next dollar above that threshold begins contributing toward profit, assuming your cost structure stays the same.
What happens if you raise your price?
This is where break-even analysis becomes especially useful.
Imagine the same business:
Fixed costs: $5,000
Variable cost per unit: $30
Original selling price: $50
At $50, your contribution margin is $20, so your break-even point is 250 units.
If you raise the price to $55, your contribution margin increases to $25.
Now you only need to sell 200 units to cover the same $5,000 in fixed costs.
That does not automatically mean raising prices is the right move. Demand might change. Customers may react. Competitors may respond.
But the math shows you exactly how much room you gain.
What if your supplier raises prices?
The opposite can happen just as quickly.
If your variable cost rises from $30 to $35 while your selling price stays at $50, your contribution margin falls from $20 to $15.
Now the same $5,000 in fixed costs requires about 334 units to break even.
That is a big shift—without changing your rent, staff, or sales price at all.
“I sell multiple products. Can I still use this?”
Yes, but with care.
If your products have very different prices and costs, a single break-even number may hide important differences.
You can calculate each major product separately, or use a weighted average contribution margin if you understand your typical sales mix.
For many small businesses, separate product-level calculations are easier to interpret.
Common break-even mistakes
Using revenue instead of contribution margin
Revenue does not pay fixed costs dollar-for-dollar. Variable costs must come out first.
Forgetting payment fees or shipping
Small per-sale expenses can materially change the contribution margin when volume grows.
Mixing monthly and annual numbers
If your fixed costs are monthly, your pricing and sales assumptions should represent the same period.
Assuming every sale has the same economics
Discounts, returns, product mix, and promotional pricing can change your real contribution margin.
How break-even connects to profit margin
Break-even tells you where profit begins.
Profit margin tells you how much of your revenue is left after the costs you are measuring.
They answer different questions, but they work well together.
If you have not already checked your margin, use our Free Profit Margin Calculator to see how much of your revenue your business is actually keeping.
A practical way to use this calculator every month
Run the numbers whenever one of these changes:
your selling price, supplier cost, payroll, rent, advertising, shipping, transaction fees, or other major overhead.
Then ask one simple question:
Did my break-even point move up or down?
If it moved up, your business now needs more sales just to reach zero profit.
If it moved down, each sale is doing more work toward covering your fixed costs.
Frequently Asked Questions
What is a good break-even point?
There is no universal target. A lower break-even point generally gives a business more breathing room, but what is realistic depends on your industry, pricing, cost structure, and sales capacity.
Can break-even revenue be different from actual monthly sales?
Yes. Break-even revenue is the estimated minimum revenue needed to cover the costs included in your calculation. Your actual revenue may be higher or lower.
Should I include payroll in fixed costs?
It depends on how that payroll behaves. Salaried wages that remain fairly stable may function more like fixed costs, while commissions or hourly labor tied directly to sales may behave more like variable costs.
Can service businesses use this calculator?
Yes. Instead of a physical unit, you might treat one billable hour, appointment, project package, or service session as the unit.
What if my variable cost is higher than my selling price?
Then each additional sale loses money before fixed costs are even considered. The calculator will not produce a normal break-even point because the contribution margin is zero or negative.
The goal is not just to break even
Break-even is the starting line, not the finish line.
Once you know the point where your costs are covered, you can build a more realistic sales target on top of it.
That makes pricing decisions less emotional, sales goals more useful, and cost increases easier to evaluate before they become a problem.