Break-Even Calculator

What Is Break-Even Analysis?

Break-even analysis determines the point at which total revenue equals total costs, meaning the business makes neither a profit nor a loss. It's a fundamental tool for business planning, pricing decisions, and financial viability assessment.

The Break-Even Formula

Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit). The denominator (Selling Price − Variable Cost) is called the contribution margin — it represents how much each unit contributes toward covering fixed costs.

Fixed vs Variable Costs

Fixed costs remain constant regardless of production volume: rent, insurance, salaries, loan payments. Variable costs change with each unit produced: raw materials, packaging, direct labor, sales commissions. Correctly classifying costs is essential for accurate break-even analysis.

Break-Even Charts

A break-even chart plots revenue and total cost against volume. Where the revenue line crosses the total cost line is the break-even point. Below this point, the gap between costs and revenue represents losses; above it, profits. The fixed cost line runs horizontally, showing costs that exist even at zero production.

Break-Even for Startups

For new businesses, break-even analysis answers the critical question: how much do I need to sell to survive? It informs pricing strategy, helps secure funding by showing investors when profitability begins, and provides concrete sales targets for the team.

Margin of Safety

The margin of safety measures how far above break-even your current sales are. A higher margin of safety means the business can weather sales declines without becoming unprofitable. It's calculated as: (Current Sales − Break-Even Sales) ÷ Current Sales × 100.