Break-Even

Break-even: how many sales cover your costs

The break-even point is the sales volume at which revenue exactly covers all costs, so profit is zero. Below it you lose money, above it every extra sale adds profit. It answers practical questions before they turn into problems: can this price work, can the business carry a new expense, how slow can a month be before it costs you money.

The calculation splits costs in two. Fixed costs stay the same whatever you sell during the period — rent, software, insurance, a salary. Variable costs come with each unit — materials, packaging, shipping you pay, payment and marketplace fees. The price minus the variable cost is the contribution margin: what each sale contributes toward fixed costs. Divide fixed costs by it and you have the break-even point. With $10,000 of fixed costs, a $50 price and a $30 variable cost, each sale contributes $20, and you need 500 units, or $25,000 of revenue, to break even.

What is in this section

The break-even calculator gives the point in units and in dollars, together with the contribution margin per unit and as a ratio. The guide on finding your break-even point shows how to sort real costs into fixed and variable and how to add a profit target to the same formula. The contribution margin guide explains the number behind every break-even calculation, how it differs from gross margin and how to get break-even revenue without counting units.

Using the result

Keep the period consistent: monthly fixed costs give units per month. Round the result up, because the unit just below the exact figure still leaves a small loss. Then test changes. A higher price raises the contribution and lowers the break-even point; a new monthly expense raises it. With positive fixed costs, a price equal to variable cost leaves the fixed loss unchanged; a lower price increases the loss with each sale. A positive-contribution model is needed to recover those fixed costs through volume. With no fixed cost, zero sales already break even; at zero contribution every volume breaks even, so there is no unique threshold.