The break-even point is the level of sales where your total revenue exactly covers your total costs — the moment your business stops losing money and starts making it. Knowing it turns pricing, hiring, and marketing decisions from guesses into math.
Fixed vs. variable costs
First, split your costs. Fixed costs stay roughly the same regardless of sales — rent, insurance, salaries, software. Variable costs rise with each sale — materials, payment fees, shipping, hourly labor tied to output. You need both to find break-even, because break-even is about how much each sale contributes toward covering the fixed costs.
The two formulas
Break-even in units = fixed costs ÷ (price per unit − variable cost per unit). Break-even in revenue = fixed costs ÷ contribution margin ratio, where the contribution margin ratio is (price − variable cost) ÷ price. The first tells you how many to sell; the second tells you the revenue you must hit.
Add a profit target
Break-even just covers costs — you're in business to profit. To find the sales needed for a target profit, add that profit to fixed costs in the numerator: (fixed costs + target profit) ÷ contribution margin per unit. This is the number that should actually drive your goals.
Run your numbers
The Break-Even Calculator computes both the unit and revenue break-even and lets you layer in a profit target, so you know exactly what to sell to win.
Open the free Break-Even Calculator →
Frequently asked questions
What is the break-even point formula?
Break-even units = fixed costs ÷ (price − variable cost per unit). Break-even revenue = fixed costs ÷ contribution margin ratio. Add a target profit to fixed costs to find the sales needed to actually profit.
What's a contribution margin ratio?
It's (price − variable cost) ÷ price — the share of each sales dollar left over to cover fixed costs and profit. A $100 product with $60 variable cost has a 40% contribution margin ratio.
Why does break-even matter for pricing?
It shows how a price change moves the sales volume you need. Raising price lifts contribution margin and lowers break-even; discounting does the opposite, often more than owners expect.