Break-Even Calculator

Break-Even Units = Fixed Costs / (Selling Price - Variable Cost Per Unit). The denominator is called the contribution margin per unit. Break-Even Revenue = Break-Even Units x Selling Price. To include a target profit: Target Units = (Fixed Costs + Target Profit) / Contribution Margin.

Contribution margin is the amount each sale contributes to covering fixed costs and profit: Selling Price - Variable Cost = Contribution Margin. A product selling for $100 with $60 variable cost has a $40 contribution margin (40%). Higher contribution margins mean fewer units needed to break even.

Service businesses sell time, not units. Restate the formula: Break-Even Hours = Fixed Costs / (Hourly Rate - Variable Cost per Hour). A consulting firm with $15,000/month fixed costs billing at $150/hour with $30/hour variable cost needs 125 billable hours/month to break even (78% utilization of 160 available hours).

Use the weighted average contribution margin. Example: Product A ($30 margin, 60% of sales) and Product B ($10 margin, 40% of sales). Weighted CM = (0.60 x $30) + (0.40 x $10) = $22. Break-even units = Fixed Costs / $22. Product mix shifts change your break-even — selling more low-margin products increases the number of sales required.

Use the target-profit formula: Required Sales = (Fixed Costs + Target Profit) / Contribution Margin. If your fixed costs are $10,000/month and contribution margin is $20/unit, you need (10,000 + 5,000) / 20 = 750 sales/month for $5,000 profit.

Minimum Price = Variable Cost + (Fixed Costs + Target Profit) / Expected Units. If variable cost is $30, fixed costs are $10,000, target profit is $5,000, and you expect to sell 500 units: Required CM = $15,000/500 = $30. Minimum price = $30 + $30 = $60.

It depends on how you structure your analysis. Many small business owners exclude their own compensation, which makes break-even appear artificially low. CostPrism allows you to include owner compensation as a fixed cost so you can see the true break-even point including a reasonable owner income.

Yes. Payment processing fees (e.g., 2.9% + $0.30 per transaction) increase with each sale, making them variable costs. The percentage component scales with price while the fixed per-transaction fee is constant per sale. Both should be included in your variable cost per unit.

Salaried employees are typically fixed costs — their wages don't change with sales volume. Hourly production workers or commissioned salespeople are variable costs. Include fixed employee costs in your monthly fixed costs, and per-unit labor in variable costs.

Margin of Safety = (Current Sales - Break-Even Sales) / Current Sales. It measures how far sales can drop before you start losing money. A 25% margin of safety means sales can decline 25% before hitting break-even. Below 10% is risky — small revenue swings cause losses.

No. Break-even means the business covers the costs included in your model — zero profit, zero loss. It does not automatically mean you are earning a satisfactory owner income. Every sale above break-even contributes directly to profit at your contribution margin rate.

Standard break-even analysis does not include income taxes. You can add a tax reserve to your target profit to account for estimated taxes. CostPrism's calculator is a planning estimate — actual taxes depend on entity type, deductions, and circumstances.

Break-even analysis assumes cash arrives when sales are recorded. Cash flow accounts for payment timing — if you pay suppliers in 30 days but collect from customers in 60 days, you need working capital even if you are technically profitable. Break-even tells you when you stop losing money on paper; cash flow tells you when you stop running out of money.

Yes — break-even analysis is essential for startups. It helps determine how much capital you need before becoming self-sustaining. Use CostPrism's startup runway feature to estimate which month your business reaches break-even based on expected revenue growth.

Your state affects fixed costs (rent, labor, insurance) and potentially pricing power. Higher-cost states like California and New York have higher fixed costs but may support higher prices. CostPrism uses BEA Regional Price Parities and BLS wage data to provide state-specific cost context.

Freelancers should include all business expenses plus desired personal income. Break-Even Hours = (Business Expenses + Target Income) / (Hourly Rate - Variable Cost per Hour). A freelancer with $2,000/month expenses wanting $6,000/month income at $100/hour with $5 variable cost needs 84 billable hours/month.

Restaurant break-even uses average check as the selling price and food/beverage cost as the primary variable cost. With a $30 average check, $10 food cost, and $40,000 monthly fixed costs: CM = $20, break-even = 2,000 checks/month. At 26 operating days, that's approximately 77 customers/day.

When selling multiple products with different margins, your break-even depends on the sales mix. A weighted contribution margin combines each product's margin by its share of total sales. If your mix shifts toward low-margin products, your break-even units increase even if total unit volume stays the same.

Contribution Margin Ratio = Contribution Margin / Selling Price. It shows what percentage of each sales dollar contributes to fixed costs and profit. A 40% CMR means $0.40 of every dollar covers overhead. Break-Even Revenue = Fixed Costs / CMR.

Operating leverage measures how sensitive profit is to sales changes. Businesses with high fixed costs and low variable costs have high operating leverage — small revenue increases produce large profit gains above break-even, but small revenue decreases below break-even cause large losses. This is why break-even analysis matters.

Break-even analysis is a planning estimate. The SBA describes break-even analysis as an estimate that is not intended to perfectly determine accounting or financing outcomes. Use it as a planning tool alongside proper accounting and financial advice.