Determine the number of units you need to sell to cover all costs and start generating profit.
Last updated: March 2026
Rent, salaries, insurance, etc.
Materials, labor per unit
Price charged to customer
Disclaimer: This calculator provides simplified financial estimates. It does not account for taxes, demand variability, pricing changes, seasonality, or real-world business conditions. Use as a planning guide only and consult financial professionals for detailed business analysis.
The break-even point is the number of units you must sell to cover all costs—both fixed and variable. At this point, total revenue equals total costs, resulting in zero profit and zero loss. Any sales beyond the break-even point generate profit.
Understanding your break-even point is critical for pricing decisions, financial planning, and assessing business viability. Fixed costs remain constant regardless of production volume (rent, salaries, insurance), while variable costs change with each unit produced (materials, direct labor, shipping). The contribution margin—the difference between selling price and variable cost per unit—represents how much each sale contributes toward covering fixed costs.
The contribution margin represents the amount each unit sold contributes toward covering fixed costs and generating profit. Once enough units are sold to cover all fixed costs, every additional unit sold adds directly to profit.
A bakery has $5,000 monthly fixed costs, $10 variable cost per cake, selling at $25 each:
Selling 335 cakes generates $15 profit. Selling 400 cakes generates (400-334) × $15 = $990 profit.
Consider reducing fixed costs, lowering variable costs through efficiency or bulk purchasing, or increasing your selling price. If none are feasible, the business model may not be viable.
Yes, depreciation of equipment and facilities should be included in fixed costs. It's a real cost of doing business even though it doesn't involve cash outflow each period.
Discounts reduce your selling price, which lowers the contribution margin and increases the number of units needed to break even. Always recalculate when offering promotions.
This varies by industry. Restaurants often operate at 60-70%, while software companies might see 80-90%. Higher ratios mean more profit per sale but require sustainable pricing.
Yes, but you'll need to calculate a weighted average contribution margin based on your product mix. Or calculate break-even for each product line separately.
Recalculate whenever costs change (rent increase, supplier price changes) or when adjusting pricing. Quarterly reviews are common, but monthly is better for new businesses.
Taxes and interest affect net profitability and cash flow but are often excluded from simple break-even analyses. For full financial planning, include them in detailed forecasts.
Use weighted-average contribution margins for multiple products or pricing tiers, or calculate separate break-evens per product line for clarity.
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