Find out how many units you need to sell — and how much revenue you need — before you start making a profit.
Your break-even point is where total revenue exactly covers total costs — no profit, no loss. Every sale beyond it contributes to profit.
Contribution Margin = Price per Unit − Variable Cost per Unit
Break-Even Units = Fixed Costs ÷ Contribution Margin
Example: with $5,000 in fixed costs, a $50 selling price, and $20 of variable cost per unit, each sale contributes $30. You break even after about 167 units, or $8,350 in revenue.
The contribution margin is the heart of break-even analysis. It's the amount each sale contributes toward covering your fixed costs after the variable costs of that sale are paid. Until you've sold enough units to cover all fixed costs, every contribution margin goes toward the fixed-cost "hole." Once that hole is filled, each additional unit's contribution margin becomes pure profit. A higher contribution margin per unit means you reach break-even faster and profit more quickly afterward, which is why pricing power and low variable costs are so valuable.
There are two ways to express your break-even point. In units, it's fixed costs divided by the contribution margin per unit — the number of items you must sell. In revenue (dollars), it's fixed costs divided by the contribution margin ratio (contribution margin ÷ price). The revenue figure is especially useful for businesses that sell many different products, where counting individual units isn't practical. This calculator shows you both so you can plan around whichever is more meaningful for your business.
A lower break-even point means less risk — you become profitable sooner. There are three main levers:
Break-even analysis isn't just for startups. Use it to evaluate whether to launch a new product, whether a planned price change makes sense, how many units a marketing campaign needs to generate to pay for itself, and how much cushion you have before a sales dip pushes you into a loss. Pair it with our profit margin calculator to confirm that sales beyond break-even are as profitable as you expect, and the ROI calculator to assess the return on the upfront investment.
Divide your total fixed costs by the contribution margin per unit, where the contribution margin is the selling price minus the variable cost per unit. With $5,000 in fixed costs and a $30 contribution margin ($50 price − $20 variable cost), you break even at about 167 units.
The contribution margin is the portion of each sale that's left after paying the variable cost of producing that unit. It "contributes" to covering fixed costs and, once those are covered, to profit. It's calculated as selling price minus variable cost per unit.
Fixed costs stay the same no matter how much you sell — rent, salaries, insurance, software subscriptions. Variable costs change with each unit sold — raw materials, packaging, shipping, and payment-processing fees.
Only if your selling price is higher than your variable cost per unit. If the price is equal to or below the variable cost, each sale loses money and you can never cover your fixed costs, so there is no break-even point.
It tells you the minimum sales needed to avoid a loss, which is essential for setting sales targets, pricing products, planning budgets, and judging the risk of new ventures. Sales above break-even generate profit; sales below it generate a loss.