Break-Even Calculator

Before launching a product or opening a shop, the first question is how many sales it takes to stop losing money. Enter your fixed costs, the selling price and what each unit costs you to make, and this calculator gives the break-even number of units and the revenue it represents. Add a profit target and it tells you what you'd need to sell to reach it.

How to use it

1. Enter fixed costs such as rent, salaries and software.
2. Enter the selling price per unit.
3. Enter the variable cost per unit, like materials and packaging.
4. Optionally add a profit goal, then read the units and revenue needed.

When it helps

• Deciding whether a new product can work.
• Setting prices for a small business.
• Planning how many sales you need each month.
• Seeing how rising costs move the break-even point.

Good to know

• If the price isn't higher than the variable cost, there's no break-even, and the tool says so.
• The result is rounded up, since you can't sell part of a unit.
• Add your own pay to fixed costs if the business has to support you.

The break-even formula

Break-even units equal fixed costs divided by the contribution margin per unit, where the contribution margin is the selling price minus the variable cost. With fixed costs of 5,000, a price of 25 and a variable cost of 10, each unit contributes 15, so you need 334 units to cover costs.

To reach a profit target, add it to the fixed costs before dividing. A profit goal of 3,000 needs 534 units.

Worked example: a food stall

A stall has fixed costs of 120,000 a month for rent, a helper and licences. A plate sells for 2,500 and costs 1,000 in ingredients. Contribution is 1,500 per plate, so you need 80 plates a month to break even, about 3 a day over a 26-day month.

If ingredient prices rise to 1,300, contribution drops to 1,200 and break-even rises to 100 plates. That's the kind of what-if the tool makes easy.

Using the result

Compare the break-even number with realistic sales. If you need 500 sales a month but expect 300, change something: raise the price, cut costs, or rethink the plan. Small changes in price have a big effect on break-even.

Review the calculation whenever costs change. A new rent bill or supplier price can move your break-even point.

Limits of the model

The simple model assumes a single product, steady costs and a constant price. Real businesses have several products, discounts, bulk costs and costs that step up at certain sales levels. Treat the result as a first estimate.

For several products, calculate the average contribution per sale based on your usual mix, or run the model for the best-selling item.

Questions