How many sales does it take to stop losing money? And how much room do you have if sales fall?
Leave blank to see the break-even point alone.
Break-even units per month
400
Break-even revenue per month
$20,000.00
Contribution margin per unit
$30.00
Contribution margin ratio
60.0%
Units above / below break-even
−80
Revenue needed to cover fixed costs
$12,000.00
| Measure | Amount |
|---|---|
| Units sold per month | 320 |
| Break-even units | 400 |
| Difference | −80 |
| Revenue at current sales | $16,000.00 |
| Profit or loss at current sales | −$2,400.00 |
| Sales needed to reach break-even | 80 more units |
Break-even is the volume at which profit is exactly zero. Its real value is not the number itself but what it reveals: how much of every sale is left over after variable costs to cover your fixed bills. That leftover is called contribution margin, and it is the number that decides whether a business model works.
A business with $50 of sales and $20 of variable cost has $30 per unit toward its fixed costs. If fixed costs are $12,000 a month, 400 units covers them. If your actual sales are lower, every unit sold still loses money. That is the trap most new businesses fall into, because contribution margin is easy to overlook when the price feels healthy.
| Type | Meaning | Examples |
|---|---|---|
| Fixed | Does not change with volume, within a reasonable range | Rent or mortgage, salaried staff, insurance, software subscriptions, website hosting, depreciation |
| Variable | Changes directly with each unit sold | Materials, packaging, payment processing fees, shipping, sales commission, direct production labor |
| Semi-variable | Partly fixed, partly variable | Utilities, phone plans, marketing spend if you tie it to volume |
Classification matters because break-even only works if costs are assigned to the right bucket. A retainer that steps up after 500 clients is semi-variable, and treating it as fully fixed will understate your break-even.
| Contribution margin ratio | What it means for you |
|---|---|
| Below 20% | Very thin. A small rise in variable cost pushes you under. Raising price or cutting cost is usually the only way out. |
| 20–40% | Tight but workable, common in retail and distribution. Break-even will be high in units. |
| 40–60% | Healthy. Most well-run small service businesses sit here. |
| 60–80% | Strong, typical of software, agencies and professional services. |
| Above 80% | Very high, usually a service with negligible material cost. |
Break-even analysis finds the point where total revenue equals total costs, so profit is zero. Below it you lose money on every sale; above it each sale adds to your profit. It answers two questions: how much must I sell to stop losing money, and how much room do I have if sales fall? It is the fastest way to test whether a price, a lease or a product launch is financially survivable.
Divide fixed costs by the contribution margin per unit, which is selling price minus variable cost per unit. If fixed costs are $12,000 per month, price is $50 and variable cost is $20, contribution margin is $30, so break-even is $12,000 divided by 30, which is 400 units a month. The same arithmetic expressed in revenue form is fixed costs divided by the contribution margin ratio.
Break-even units is the number of items or jobs you must sell. Break-even revenue is the sales value at that point, which is units multiplied by price. They diverge when you sell at very different price points. Revenue is the better measure for comparing against a sales target, while units is better for planning production and staffing.
Usually because your contribution margin is low, meaning variable costs consume most of your price. If materials and labor leave only a small amount per item to cover fixed costs, break-even becomes large regardless of how good the gross margin looks. Raising prices, reducing variable cost, or lowering fixed overhead all move the point down. Check the contribution margin ratio above first, because it explains most cases.
Include it if you need to pay yourself to keep operating. Your compensation is a real cost of the business, and excluding it understates break-even, which can make an unsustainable plan look viable. Exclude it only when you are calculating return on the business as an investment, where your unpaid time is treated as a contribution rather than an expense.
A common target is 20 to 30 percent above break-even, which gives room for a slow month, unexpected costs, and a downward sales swing. If your sales sit exactly at break-even, any small disruption turns into a loss. The cushion is also what funds growth, because cash generated above break-even is what pays for hiring or inventory expansion.