Break-Even Calculator
Enter your fixed costs, price, and variable cost per unit. We'll tell you where profits begin — and your margin of safety.
Contribution margin per unit: $120 (60.0%). Every dollar of sales beyond break-even flows to profit at that rate.
How to calculate your break-even point
Break-even is the point where total revenue exactly covers total cost — the sales volume at which the business stops losing money and starts making it. Everything you sell below that line funds overhead; everything above it drops to profit at your contribution margin rate. Most owners can name their monthly revenue but not their break-even, which is why a busy month can still end with an empty bank account.
The calculation only needs three inputs: your monthly fixed costs, your price per unit or job, and the variable cost of delivering one more unit. Fixed costs are the ones that show up whether you sell anything or not — rent, insurance, admin payroll, software, loan interest. Variable costs move with volume: materials, subcontractors, merchant fees, freight, billable labor you only pay when the work is sold.
The break-even formulas
Contribution margin per unit
Price − Variable cost
What one sale contributes toward fixed costs. If this number is negative, no volume can save you — the price is wrong.
Break-even in units
Fixed costs ÷ Contribution margin
How many jobs, units, or clients you must deliver each month before the business earns a dollar of profit.
Break-even in revenue
Fixed costs ÷ Contribution margin ratio
The same answer expressed in dollars, which is easier to compare against your actual sales pipeline.
How to read your result
Margin of safety is the number to watch
Margin of safety shows how far revenue can fall before you hit break-even. Under 20% means one lost client or one slow month puts you underwater; over 40% gives you room to invest, hire, or absorb a bad quarter.
Fixed cost creep moves break-even fastest
Adding a $2,000 monthly hire at a 40% contribution margin raises break-even revenue by $5,000 — not $2,000. Run the number before you sign a lease, add software, or bring someone on.
Price beats volume almost every time
A 10% price increase with unchanged costs raises contribution margin far more than a 10% volume increase, because none of the extra dollars carry variable cost with them.
Frequently asked questions
+What is the break-even formula?
Break-even units = fixed costs ÷ (price per unit − variable cost per unit). Break-even revenue = fixed costs ÷ contribution margin ratio, where the ratio is (price − variable cost) ÷ price. Both answer the same question in different units.
+What counts as a fixed cost versus a variable cost?
Fixed costs occur regardless of sales volume: rent, insurance, salaried admin staff, software subscriptions, loan interest. Variable costs are incurred only when you sell: materials, subcontractors, freight, merchant processing, hourly production labor. Some costs are mixed — a utility bill with a base charge plus usage — and should be split between the two.
+How do I calculate break-even for a service business with no units?
Use an average job or engagement as the unit, or work entirely in revenue. Divide monthly fixed costs by your gross margin percentage to get break-even revenue. A firm with $15,000 of fixed costs and a 60% gross margin breaks even at $25,000 of monthly billings.
+Should owner pay be a fixed cost in the break-even calculation?
Yes, if you want a number that reflects reality. A break-even point that excludes a market-rate wage for the owner is not break-even — it is the point where the business survives by underpaying you. Include what it would cost to replace the work you personally do.
+How often should I recalculate break-even?
Any time fixed costs change by more than a few percent, and at minimum every quarter. Price changes, a new hire, a lease renewal, or a shift in your materials cost all move the line.
Not sure which costs are fixed and which are variable?
Break-even is only as accurate as your chart of accounts. When subcontractors sit in overhead, or owner pay is missing entirely, the calculator returns a comfortable number that is not true. We clean up the accounts, split direct cost from overhead, and give you a P&L where break-even means something.
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