Break-Even Calculator

The break-even point is the number of units you must sell (or revenue you must generate) to cover all costs — fixed and variable. At this point, profit = $0. Selling more generates profit; selling less generates a loss. It is a fundamental business planning tool.

Contribution margin = Price - Variable Cost per unit. It is the amount each unit sold contributes toward covering fixed costs and then generating profit. Example: $50 price - $20 variable cost = $30 contribution margin. After covering fixed costs, each additional unit generates $30 profit.

Fixed costs stay constant regardless of production volume: rent, insurance, salaries, software subscriptions. Variable costs change with each unit produced: raw materials, packaging, direct labor, shipping. Most businesses have both. Understanding this split is essential for pricing and forecasting.

Three approaches: (1) Increase selling price — most powerful but may reduce demand. (2) Reduce variable costs — negotiate better supplier prices, improve processes. (3) Reduce fixed costs — smaller space, fewer subscriptions, automation. Combination approaches work best.

Software: often 70-90% (low variable costs). Manufacturing: 20-40% typical. Retail: 10-30%. Service businesses: 40-70%. There is no universal benchmark — compare within your industry. Higher is better because each dollar of revenue contributes more to covering fixed costs and profit.