Break-even point: how much you need to sell to stop losing money
The break-even point is the level of sales at which a business covers all its costs. Below it you lose money; above it every sale is profit.
Fixed and variable costs
- Fixed costs: what you pay even with no sales (rent, salaries, subscriptions, insurance).
- Variable costs: what each unit sold costs (materials, packaging, shipping, commission).
The contribution margin is what each sale leaves to pay fixed costs: price − variable cost.
The formulas
Break-even units = fixed costs ÷ contribution margin per unit
Break-even revenue = break-even units × price
Worked example
An online shop sells a product for 39. It costs 14 to buy and ship. Fixed costs are 4,500 a month.
- Contribution margin: 39 − 14 = 25 (64% of the price).
- Break-even: 4,500 ÷ 25 = 180 sales a month.
- Revenue at break-even: 180 × 39 = 7,020.
- With 250 sales: (250 − 180) × 25 = 1,750 profit.
| Sales per month | Revenue | Profit |
|---|---|---|
| 120 | 4,680 | −1,500 |
| 180 | 7,020 | 0 |
| 250 | 9,750 | +1,750 |
| 300 | 11,700 | +3,000 |
How to lower your break-even point
- Raise the price: at 42, the margin becomes 28 and break-even drops to 161 sales. The price change impact calculator shows how many customers you can lose and still come out ahead.
- Cut variable costs (better supplier, bundled shipping).
- Cut fixed costs.
Your numbers
The break-even calculator does this for you. To see the date you'll reach it in the year, use break-even date. And to set a price from the margin you want, try selling price from target margin.
Frequently asked questions
How do you calculate the break-even point?
Divide fixed costs by the contribution margin per unit (price − variable cost). 4,500 of fixed costs and a 25 margin per sale give 180 sales.
What is a contribution margin?
The selling price minus the variable cost of one unit: what each sale leaves to cover fixed costs.
What is the difference between break-even point and break-even date?
The break-even point is an amount (units or revenue). The break-even date is when in the year you reach it.
This information is for guidance only and does not replace professional advice.