Free Break Even Calculator

What Break-Even Analysis Tells You

Break-even is the point where revenue equals total costs. Below it, you lose money. Above it, you profit. For a coffee shop with $5,000/month in fixed costs selling $5 lattes that cost $1.50 to make, break-even is 1,429 lattes per month. Sell 1,430 and you made $3.50 profit. Sell 1,000 and you lost $1,500.

The Formula

Break-Even Units = Fixed Costs / (Price Per Unit - Variable Cost Per Unit)

The denominator (Price - Variable Cost) is called the contribution margin. It's how much each sale contributes toward covering fixed costs.

When to Use This

Launching a new product and need to know minimum sales volume. Setting prices and testing whether a lower price with higher volume beats a higher price with lower volume. Deciding whether to add a fixed cost (new hire, lease, equipment) and what sales increase you need to justify it.

Fixed vs. Variable Costs

Fixed costs don't change with sales volume: rent, salaries, insurance, loan payments. Variable costs scale with each unit sold: materials, packaging, shipping, payment processing fees. Getting this split wrong is the most common mistake. Some costs are mixed: a warehouse has fixed rent but variable utility costs as production increases.

What This Doesn't Cover

Break-even assumes you sell every unit at the same price, which rarely happens in practice (discounts, bundles, returns). It also assumes costs stay constant, but variable costs often decrease per unit at higher volumes (bulk material discounts) and fixed costs can jump in steps (need a second warehouse at 10,000 units).

Common Mistakes

Forgetting to include all fixed costs. Founders often exclude their own salary, software subscriptions, or marketing spend. If you're paying for it whether you sell or not, it's a fixed cost.

Treating labor as fixed when it's partially variable. If you hire part-time help during busy periods, that labor cost scales with volume.

Using break-even as a business plan. Reaching break-even means you made $0 profit. Your goal is to exceed it by enough to make the business worthwhile.