Break-Even Analysis — How to Calculate Your Break-Even Point
Updated October 2026 · 5 min read
Quick start: Open the free Break-Even Calculator — enter fixed costs, variable cost per unit and selling price to see break-even units and revenue.
Break-even analysis is the first calculation every business owner should do before launch. It answers the most fundamental question: "How much do I need to sell to stop losing money?" Once you know your break-even point, every sale above it is profit.
The Break-Even Formulas
Contribution Margin (per unit):
CM = Selling Price − Variable Cost per Unit
Break-Even Units:
Break-Even Units = Fixed Costs ÷ Contribution Margin
Break-Even Revenue:
Break-Even Revenue = Break-Even Units × Selling Price
Worked Example — Coffee Shop
- Fixed costs: $5,000/month (rent $3,500 + staff $1,500)
- Selling price per cup: $5.00
- Variable cost per cup: $1.50 (coffee, milk, cup)
- Contribution margin: $5.00 − $1.50 = $3.50
Break-even units = $5,000 ÷ $3.50 = 1,429 cups/month
Break-even revenue = 1,429 × $5.00 = $7,143/month
The shop must sell 1,429 cups per month (about 48/day) just to cover costs. Every cup above that contributes $3.50 to profit. At 2,000 cups/month: profit = (2,000 − 1,429) × $3.50 = $1,999/month.
Fixed Costs vs Variable Costs — What Goes Where?
| Fixed costs | Variable costs |
|---|---|
| Rent / office space | Raw materials / COGS |
| Salaried staff | Packaging & shipping |
| Insurance | Payment processing fees |
| Software subscriptions | Sales commissions |
| Loan repayments | Freelancer / contractor costs |
Using Break-Even to Make Business Decisions
- Pricing: If break-even is too high at current prices, raise the price — see how the break-even point drops.
- Cost cuts: Reducing fixed costs by $500/month at $3.50 CM saves 143 units of break-even sales. Is that cut achievable?
- New product decisions: Calculate break-even before launching — does your expected sales volume exceed it?
- Hiring: Each new salaried hire raises fixed costs. How many more units must you sell to cover their salary?
Calculate Your Break-Even Point
Enter fixed costs, variable cost per unit and selling price — get break-even units, revenue and a margin-of-safety figure.
Open Free Break-Even Calculator →