data tool
Break even calculator
Break even is the number of sales at which revenue equals total cost: fixed costs divided by what each sale contributes after its own cost. Enter monthly fixed costs, a price and a cost per unit to get the break even units, the revenue that takes, the contribution margin, and a chart of where the lines cross.
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- Runs on your device, nothing is uploaded
- Free, no sign in
- No watermark, no file limit
How it works
- 1
Add up fixed costs
Rent, wages, insurance, software, loan repayments: everything you pay in a month whether you sell anything or not.
- 2
Enter price and unit cost
The price you sell one unit for, and what that one unit costs you to make or buy.
- 3
Read break even
The tool shows how many units cover the month's fixed costs and the revenue that brings in.
- 4
Test your forecast
Enter the units you expect and see the profit or loss, then try different prices.
The formula in words
Each sale brings in its price and costs you its variable cost, the materials, packaging or stock that go with that one unit. What is left is the contribution: the amount the sale adds towards fixed costs. Divide the month's fixed costs by the contribution per unit and you have the number of sales needed to pay for the month. A cafe with $9,600 of fixed costs a month selling coffee at $5.50 that costs $1.70 to make contributes $3.80 a cup and needs 2,527 cups a month to break even, which is about 84 a day over a 30 day month.
Contribution margin is the number to watch
The contribution margin, contribution divided by price, says what share of every dollar of sales goes towards fixed costs and profit. At $3.80 on a $5.50 price it is 69%. A high contribution margin means each sale does a lot of work, and the business reaches break even sooner. Raising the price lifts it directly, while a discount cuts it: 10% off that coffee drops the contribution from $3.80 to $3.25, and break even rises from 2,527 cups to 2,954. Run the numbers before running a promotion.
Reading the chart
The red line is total cost: it starts at the fixed costs, because you pay those with zero sales, and climbs by the variable cost of each unit. The blue line is revenue, starting at zero and climbing by the price of each unit. Where they cross is the break even point, marked with a dot. Left of it every month is a loss; right of it, the gap between the lines is profit. The steeper the revenue line compared with the cost line, the sooner they cross.
How long until a new business breaks even
Break even units tell you volume, not time. To get a date, compare the break even volume with what you can realistically sell each month as the business builds. If a new cafe expects 1,500 cups in the first month and 3,000 by month six, it crosses break even somewhere in between, and the months before that need funding. That gap, plus the cost of setting up, is the cash a business plan needs to show it has. Banks and investors will ask for this calculation.
Using break even in a plan or pitch
A break even chart is one of the clearest slides in a pitch deck or business plan, because it shows the bar the business has to clear. The presentation builder's chart slots include a line chart, so the cost and revenue lines can be drawn on a slide with the break even point labelled. In a business plan document, state the assumptions under the chart: the price, the unit cost and what fixed costs include, so a reader can check them.
When the answer looks wrong
If the result is enormous, check the unit cost: a contribution of a few cents needs a huge volume. If it says no volume breaks even, the price does not cover the cost of the unit, and selling more only loses more. Overheads that change with volume, such as casual staff, belong in the unit cost; costs that stay the same belong in fixed costs.
Limits
- One product with one price. Mixed products need an average contribution worked out first.
- Costs rise in a straight line. Step costs, such as a second staff member at a certain volume, are not modelled.
- There is no capacity limit, so a break even point the business could never physically reach is still shown.
- Figures should exclude GST or VAT.
What it does not do
- It does not forecast sales.
- It does not model several products together.
- It does not store your figures.
Questions people ask
How do I calculate a break even point?
Divide your fixed costs by the contribution per unit, which is the price minus the variable cost of one unit. With $12,000 of monthly fixed costs and a $40 contribution per unit, break even is 300 units a month. Multiply by the price to get break even revenue.
What is contribution margin?
Contribution margin is the price minus the variable cost per unit, the amount each sale contributes to fixed costs and then profit. As a ratio it is that amount divided by the price. A product selling for $50 with $20 of variable cost has a $30 contribution and a 60% contribution margin ratio.
What counts as a fixed cost?
A cost that stays the same whatever you sell in the period: rent, salaried wages, insurance, software subscriptions, loan repayments and accounting fees. Costs that rise with each sale, such as materials, packaging, card fees and commission, are variable and belong in the unit cost instead.
Can I use break even for a service business?
Yes. Treat a billable hour, a job or a client as the unit. The price is what you charge for it and the variable cost is what that unit uses up, such as subcontractor time or materials. A consultant with $6,000 of monthly fixed costs earning $110 an hour contribution needs 55 billable hours a month.
Why is my break even point not a whole number?
Fixed costs divided by contribution rarely comes out exact, and you cannot sell a fraction of a unit. The calculator rounds up, because the last partial sale still has to happen for costs to be covered. Two thousand five hundred and twenty six and a bit cups means 2,527 cups.
Show break even on a pitch slide
Take what you made here into presentations.
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Background reading: the question page on this.
Written and checked by the OneCraft team. Last checked .