📊 Break-Even Calculator
Calculate when your business will become profitable
Fixed Costs
Rent, salaries, insurance, utilities, etc.
Variable Costs Per Unit
Materials, labor, shipping per unit
Revenue
Price you charge customers per unit
Break-Even Analysis
Break-Even Units
0
Break-Even Revenue
$0
Contribution Margin
$0
Margin Ratio
0%
Profitability Analysis
To break even: You need to sell 0 units per month
Daily sales target: 0 units per day (30-day month)
Profit per unit after break-even: $0
Safety margin: If you sell 20% more units, you'll make $0 profit
Understanding Break-Even Analysis
Break-even analysis is a critical financial calculation that helps business owners determine when their company will become profitable. It identifies the point where total revenue equals total costs, meaning you're neither making a profit nor a loss.
How This Calculator Works
The break-even point is calculated using this formula:
Break-Even Units = Fixed Costs ÷ (Selling Price - Variable Cost Per Unit)
The calculator also determines:
- Break-Even Revenue: Total sales needed to break even
- Contribution Margin: Amount each unit contributes to covering fixed costs
- Margin Ratio: Percentage of each sale that contributes to profit
Key Terms Explained
- Fixed Costs: Expenses that don't change with production volume (rent, salaries, insurance)
- Variable Costs: Expenses that change with production volume (materials, direct labor, shipping)
- Contribution Margin: Selling price minus variable cost per unit
- Break-Even Point: The sales volume where total revenue equals total costs
Why Break-Even Analysis Matters
- Pricing Decisions: Understand how pricing affects profitability
- Cost Management: Identify which costs to reduce for faster profitability
- Sales Targets: Set realistic sales goals based on financial needs
- Investment Decisions: Evaluate if a business idea is financially viable
- Risk Assessment: Understand how much sales can drop before losing money
Common Fixed Costs
- Rent or mortgage payments
- Salaries and benefits
- Insurance premiums
- Utilities (base costs)
- Software subscriptions
- Equipment leases
- Marketing and advertising
- Professional services (accounting, legal)
Common Variable Costs
- Raw materials and supplies
- Direct labor (hourly workers)
- Packaging materials
- Shipping and delivery
- Sales commissions
- Transaction fees
- Production utilities
Tips for Improving Break-Even Point
- Reduce Fixed Costs: Negotiate better rent, use freelancers instead of full-time staff
- Lower Variable Costs: Find cheaper suppliers, improve production efficiency
- Increase Prices: Add value to justify higher prices
- Improve Product Mix: Focus on higher-margin products
- Increase Volume: Economies of scale can reduce per-unit costs
Limitations of Break-Even Analysis
While useful, break-even analysis has limitations:
- Assumes all units produced are sold
- Assumes costs and prices remain constant
- Doesn't account for inventory or cash flow timing
- May oversimplify complex business models
- Doesn't consider market demand or competition
Use break-even analysis as one tool among many for business planning and decision-making.