Break-Even Calculation — Formula, Examples & Analysis
The break-even point is where your total revenue equals your total costs — you're neither making nor losing money. Every unit sold above break-even is pure profit. The break-even formula is: Fixed Costs ÷ (Price − Variable Cost). This is one of the most important calculations in business planning.
Break-Even Formulas
Break-Even in Units
Fixed Costs ÷ (Price − Variable Cost)
Example: $50,000 ÷ ($75 − $30) = 1,112 units
Contribution Margin
Price per Unit − Variable Cost per Unit
Example: $75 − $30 = $45 per unit
Break-Even in Revenue
Fixed Costs ÷ Contribution Margin Ratio
Example: $50,000 ÷ 60% = $83,333
Break-Even Calculator
Break-Even Units
1,112
Break-Even Revenue
$83,400
Contribution Margin
$45.00
CM Ratio
60.0%
Break-Even Examples by Industry
Coffee Shop
Fixed Costs
$8,000/mo
Price
$5
Variable Cost
$1.5
Break-Even
2,286 cups/month
SaaS Product
Fixed Costs
$25,000/mo
Price
$99
Variable Cost
$8
Break-Even
275 subscriptions
E-commerce Store
Fixed Costs
$5,000/mo
Price
$45
Variable Cost
$18
Break-Even
186 orders/month
Frequently Asked Questions
What is the break-even formula?
Break-Even Units = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit). The denominator is called the "contribution margin" — how much each sale contributes to covering fixed costs.
What is the difference between break-even in units vs revenue?
Break-even in units tells you how many products to sell. Break-even in revenue = Fixed Costs ÷ Contribution Margin Ratio, where CMR = (Price − Variable Cost) ÷ Price. Both give the same profitability threshold.
How does break-even analysis help business decisions?
Break-even analysis helps you: set minimum pricing, evaluate new product viability, decide whether to expand, assess the impact of cost changes, and determine how much sales volume you need to survive.
What happens if I can't reach break-even?
If break-even requires more sales than your market can support, you need to either reduce fixed costs, reduce variable costs, increase prices, or reconsider the business model entirely.
What is the margin of safety?
Margin of Safety = (Actual Sales − Break-Even Sales) ÷ Actual Sales × 100. It shows how much sales can drop before you start losing money. A 30% margin of safety means sales can fall 30% before you hit break-even.
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