Find the exact number of units you need to sell — and revenue you need to generate — to cover all your costs and break even. Essential for pricing decisions, business planning, and investor presentations. Free, no signup.
The break-even point (BEP) is the level of sales at which your total revenue exactly equals your total costs — you make neither a profit nor a loss. Every unit sold above the break-even point generates profit. Every unit below it represents a loss.
Understanding your break-even point is foundational to any business decision: pricing a product, launching a new service, deciding whether to hire staff, or evaluating whether a business model is viable at all.
Fixed costs remain constant regardless of how many units you produce or sell. They exist whether you sell 1 unit or 10,000 units. Examples include:
Variable costs change directly with production volume. Every additional unit you produce or sell adds to these costs. Examples include:
Some costs are partially fixed and partially variable — like a phone plan with a base fee plus per-minute charges, or staff who are salaried but earn overtime. For break-even analysis, split these into their fixed and variable components.
Fixed costs: $3,000/mo (hosting, software, ads base budget)
Product cost: $15/unit (variable). Selling price: $45/unit.
Contribution margin: $45 − $15 = $30/unit
Break-even: $3,000 / $30 = 100 units/month
Fixed costs: $12,000/mo (rent, staff salaries, equipment)
Average variable cost per cup: $1.20. Average selling price: $5.00.
Contribution margin: $5.00 − $1.20 = $3.80/cup
Break-even: $12,000 / $3.80 = 3,158 cups/month (~105/day)
Fixed costs: $8,000/mo (development, infrastructure, support)
Variable cost per customer: $5/mo (hosting per customer). Price: $49/mo.
Contribution margin: $49 − $5 = $44/customer
Break-even: $8,000 / $44 = 182 paying customers
A lower break-even point means you reach profitability sooner and have more resilience against slow sales periods. Here are the levers you can pull:
Negotiate rent, reduce staff overhead, cancel unused software subscriptions, or move to a home office initially. Every dollar cut from fixed costs directly reduces your break-even point.
Negotiate better supplier pricing (especially with volume), optimize your production process, reduce packaging costs, or find more efficient shipping methods.
This is the most powerful lever. A 10% price increase on a product with 40% margins increases contribution margin by 25% — dramatically reducing the break-even point. Many businesses underprice because of fear of losing customers. Test higher prices before assuming the market won't bear them.
Focus sales effort on higher-margin products. If you sell 10 product types, identify the three with the highest contribution margins and prioritize those over low-margin offerings.