What is the break-even point?
The break-even point is the number of units (or the amount of sales) where your business makes neither profit nor loss: the money coming in exactly covers all your costs. Below it you lose money; every unit above it is profit. Knowing it tells you whether a business idea, a new product or a price change can work before you spend the money.
Break-even formula
- Contribution margin per unit = selling price − variable cost per unit
- Break-even units = fixed costs ÷ contribution margin per unit
- Break-even sales = break-even units × price (or fixed costs ÷ contribution margin ratio)
- Units for a profit goal = (fixed costs + target profit) ÷ contribution margin per unit
Example: an online store
An online store sells a product for $35. Each sale costs $12 for the product, $6 for shipping and packaging and about $1.32 in payment fees — $19.32 of variable cost — so every sale contributes $15.68. Monthly fixed costs (store, apps, ads, tools and the owner’s salary) are $3,700. Break-even = $3,700 ÷ $15.68 ≈ 236 sales a month, about $8,260 in revenue or 8 orders a day. At 250 sales the store makes about $220 profit; to earn $3,000 a month it needs about 428 sales.
Fixed vs variable costs
| Fixed costs (monthly) | Variable costs (per unit) |
|---|---|
| Rent, salaries, insurance | Materials, ingredients, product cost |
| Software, website, subscriptions | Packaging, shipping |
| Loan repayments, fixed ad budget | Card & payment fees, marketplace commission |
Margin of safety and operating leverage
The margin of safety shows how far sales can fall before you reach break-even: (expected sales − break-even sales) ÷ expected sales. The higher, the safer. Operating leverage shows how strongly profit reacts to sales changes — businesses with high fixed costs see profit jump when sales grow, but fall fast when they shrink.
How to lower your break-even point
- Raise prices — even 5–10% often cuts break-even units sharply. Use the what-if sliders to test it.
- Reduce variable costs — better supplier prices, cheaper packaging or lower payment fees.
- Cut or delay fixed costs — smaller premises, fewer subscriptions, flexible staff.
- Sell more of your high-margin products — with several products, the sales mix changes the break-even point.
How many sales until you stop losing money?
Break-even units = fixed costs ÷ (price − variable cost per unit)
The difference between price and variable cost is the contribution — what each sale contributes towards rent, salaries and other fixed costs.
Example: online store
- Fixed costs per month: store apps $120, ads budget $1,500, software $80, your salary $2,000 = $3,700
- Price $35; variable costs: product $12, shipping $6, payment fees $0.30 + 2.9% = $19.32 per sale
- Contribution: $35 − $19.32 = $15.68
- Break-even: $3,700 ÷ $15.68 = 236 sales a month (about 8 a day)
More than one product?
Switch to several products (sales mix) and enter each product’s price, cost and share of sales. The calculator finds the break-even for the mix.
Plan, not just survive
- Profit goal: see how many sales you need to earn your target each month.
- Startup costs: see how many months it takes to earn them back.
- Selling days: turn monthly targets into a daily number your team can track.
Templates for a coffee shop, online store, SaaS plan, home bakery, T-shirt brand and restaurant give realistic starting numbers.