Break-Even Analysis: When Will Your Business Start Making Money?
The break-even point is the exact sales level at which your total revenue equals your total costs — you are neither making profit nor losing money. Every unit sold beyond that point is pure profit. Knowing your break-even is foundational to pricing decisions, budget planning, and evaluating whether a business idea is viable.
Fixed vs. variable costs
Fixed costs do not change with sales volume — rent, insurance, salaried staff, software subscriptions. Variable costs scale directly with output — raw materials, per-unit packaging, sales commissions. Separating these two buckets is the first step in any break-even calculation.
The break-even formula
Break-Even Units = Fixed Costs / (Price per Unit − Variable Cost per Unit). The denominator is called the contribution margin — the amount each unit sale contributes toward covering fixed costs. Once enough units are sold to cover total fixed costs, the business is at break-even. Enter your numbers into the calculator to see the exact unit and revenue threshold.
How break-even guides decisions
Raising prices lowers the break-even point; lowering prices raises it. Cutting fixed costs has the same unit-lowering effect as raising prices. A business that needs to sell 10,000 units per month to break even but currently sells 3,000 faces a very different challenge than one at 9,000 units.