Enter your fixed costs and either your per-unit price and cost or your margin percentage. You'll get break-even in units and revenue, the sales needed for a profit target, and, if you add current sales, how far you are from the line.
How break-even actually works
Think of your fixed costs as a pile that refills every month: rent, salaries, insurance, software, the loan payment. It is there whether you sell anything or not. Every sale you make chips at the pile, but not with its full price: only with what is left after the direct cost of that sale. Sell a $4.50 coffee that costs $1.30 in beans, milk, and cup, and $3.20 goes toward the pile. That leftover is the contribution margin, and break-even is simply the moment the month's chips add up to the month's pile.
That framing does two useful things. It tells you break-even in units, which is a number you can walk into the shop and count. And it makes the levers obvious: the pile (fixed costs), the chip (price minus variable cost), and nothing else. Marketing, motivation, and hustle all matter, but they act through those two numbers or not at all.
The formula
Break-even units = Fixed costs ÷ (Price − Variable cost)
Break-even revenue = Fixed costs ÷ Contribution margin ratio
The contribution margin ratio is the per-unit margin as a share of price, or, for a service business, simply the share of each sales dollar left after direct costs. For a profit target rather than plain survival, add the target to the fixed costs and divide by the same margin.
Worked example
A coffee cart pays $3,200 a month in fixed costs (pitch fee, insurance, loan payment). Each cup sells for $4.50 and costs $1.30 to make, so every cup contributes $3.20.
Break-even: 3,200 ÷ 3.20 = 1,000 cups a month, or $4,500 of revenue. To take home $2,000 on top: (3,200 + 2,000) ÷ 3.20 = 1,625 cups.
Currently selling 1,400 cups? You are 400 cups above break-even: a 28.6% margin of safety, meaning sales could fall by more than a quarter before the cart loses money. Current profit: 1,400 × 3.20 − 3,200 = $1,280 a month.
The lever nobody wants to pull
Run the numbers on a price change before you dismiss it. That coffee cart raising its price by just 50 cents (to $5.00, contribution $3.70) drops break-even from 1,000 cups to 865: 13.5% fewer cups for an 11% price rise, because the entire increase lands in the margin. Cutting variable cost has the same per-unit power and is usually harder to find. Cutting fixed costs works dollar for dollar but tends to mean real pain (moving, renegotiating, letting someone go). Most owners instinctively reach for "sell more," which is the only lever on the list that costs money to pull.
Two honest boundaries. Fixed costs are only fixed within a range: sell enough coffee and you need a second cart, a second person, a bigger pile, so re-run this at each step change rather than trusting one answer forever. And if the arithmetic says break-even is 748.3 units, the practical answer is 749: the business breaks even when the whole unit sells, which is why this calculator rounds up and says so instead of pretending a third of a sale exists.
Frequently asked questions
What is the break-even point?
The sales volume at which total revenue exactly covers total costs, so the business neither makes nor loses money. Below it every period ends in a loss, above it every additional sale is profit. It is the single most useful number a new business can know about itself.
What is the break-even formula?
Fixed costs divided by the contribution margin per unit, where contribution margin is price minus variable cost. In revenue terms, fixed costs divided by the contribution margin ratio. A $3,200 pile of fixed costs at $3.20 contribution per unit breaks even at exactly 1,000 units.
What is contribution margin?
What each sale leaves behind after its own direct costs, before touching fixed costs. A $4.50 coffee with $1.30 of ingredients contributes $3.20. It is the honest measure of what a sale is worth to the business, and it is the denominator in every break-even calculation.
Which costs are fixed and which are variable?
Fixed costs arrive whether or not you sell: rent, salaries, insurance, software subscriptions. Variable costs arrive per sale: materials, transaction fees, shipping, per-job labor. The honest complication is semi-variable costs like utilities and hourly staff; split them into their two parts, or assign them to whichever side dominates and accept slight blur.
Is my own salary a fixed cost?
It should be. Owners who pay themselves nothing calculate a flattering break-even that quietly depends on their own unpaid labor, and the business looks healthy right up until it has to pay a market wage. Put a real number for your time into fixed costs; a break-even the business only clears when you work for free is not really break-even.
What is a margin of safety?
How far current sales sit above break-even, expressed as a percentage of current sales. Selling 1,400 units against a 1,000-unit break-even is a 28.6% margin of safety: sales could fall that far before losses begin. It is the number that turns break-even from trivia into a risk measure.
How can I lower my break-even point?
Three levers only: raise the price, cut the variable cost per unit, or cut fixed costs. Small price moves are surprisingly powerful because the entire increase lands in the contribution margin; a 50-cent rise on a $4.50 product with $3.20 contribution cuts the required volume by 13.5%.
Why does the calculator round break-even units up?
Because you cannot sell a third of a unit. If the arithmetic says 748.3 units, the business is still short of break-even at 748 and crosses the line during unit 749, so the practical answer is 749. The exact figure is shown alongside so the rounding is never hidden.