Business
Break-Even Calculator
Works break-even, where contribution per unit rather than price is the divisor.
Result
Assumes one average price and variable cost. If you sell very different products or job types, run each separately: a blended average describes neither.
Get a Free Business AuditHow the calculation works
Fixed costs divided by contribution per unit, where contribution is the selling price less the variable cost of producing that unit. Dividing by the price instead of by contribution is the common error and it understates the volume required by a large margin.
What moves the number
- Fixed costs, which do not vary with volume.
- Contribution per unit after variable cost.
- Which costs are genuinely fixed over the period considered.
- Product mix, where units differ in contribution.
Where this one goes wrong
Whether a cost is fixed depends on the time horizon, since almost nothing is fixed over several years and almost everything is over a month, which means a break-even calculation has to state the period it applies to. Be explicit about it. Mix is the other complication: a business selling several products has a break-even that depends on the proportions, so the figure holds only at the assumed mix and shifts when the mix does.
Before you quote
- Divide by contribution per unit, not by price.
- State the period over which costs are treated as fixed.
- Recalculate when the product mix changes.
Questions
About this calculator
Why divide by contribution rather than price?
Because each unit also incurs a variable cost, so only the contribution goes toward covering fixed costs. Dividing by price assumes the whole sale is available for that, which understates the volume required by a large margin.
Which costs are fixed?
It depends on the horizon. Over a month almost everything is fixed; over several years almost nothing is. A break-even figure has to state the period it applies to, because the answer changes completely with it.
Does product mix affect break-even?
Yes, where products have different contributions. The figure holds only at the assumed mix, and a shift toward lower-contribution products raises the volume needed without anything else changing.
The formula
break-even units = fixed costs ÷ (price − variable cost)
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How to use this calculator
- Fixed costs per month ($). Enter your own figure; the page starts at $32,000.
- Average price per sale ($). Enter your own figure; the page starts at $1,200.
- Variable cost per sale ($). Enter your own figure; the page starts at $640.
- Target monthly profit ($). Enter your own figure; the page starts at $12,000.
The result updates as you type, so you can try a figure, see what it does to sales needed to break even, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Fixed costs per month | $32,000 |
| Average price per sale | $1,200 |
| Variable cost per sale | $640 |
| Target monthly profit | $12,000 |
What comes out
| Result | Value |
|---|---|
| Sales needed to break even main result | 57 |
| Break-even revenue | $68,571 |
| Sales needed to hit your profit target | 79 |
| Contribution per sale | $560 |
You need 57 sales a month ($68,571) to cover fixed costs. Hitting 12,000 of profit takes 79.
How sensitive the answer is
Holding everything else steady and changing only fixed costs per month, this is what happens to sales needed to break even. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Fixed costs per month ($) | Sales needed to break even |
|---|---|
| $16,000 | 29 |
| $24,000 | 43 |
| $32,000 example above | 57 |
| $48,000 | 86 |
| $64,000 | 114 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Fixed costs per month ($)
- A money amount, starting at $32,000.
- Average price per sale ($)
- A money amount, starting at $1,200.
- Variable cost per sale ($)
- A money amount, starting at $640.
- Target monthly profit ($)
- A money amount, starting at $12,000.
What the results tell you
| Result | What it is |
|---|---|
| Sales needed to break even | The headline result. A number. |
| Break-even revenue | A money figure. |
| Sales needed to hit your profit target | A number. |
| Contribution per sale | A money figure. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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