Break-Even Point Calculator

When to calculate the break-even point

The break-even point is the sales volume at which revenue exactly covers costs: below it the business loses money, above it starts making a profit. The calculation splits costs into two families: fixed costs, incurred whatever you sell (rent, salaries, depreciation, insurance, software), and variable costs, which grow with every unit produced or sold (raw materials, sales commission, packaging, payment fees).

The gap between selling price and variable cost per unit is the contribution margin: what each item sold leaves behind to cover the fixed costs. Dividing fixed costs by that margin gives the number of units at which the result is exactly zero. It is the calculation behind every business plan, every decision to launch a product, every discount you consider granting, and every make-or-buy comparison.

The margin of safety answers the next question: how far sales can fall below forecast before the business slips back into a loss. If the expected volume is 25% above break-even, the business can absorb a quarter drop in turnover; if it is 3% above, any setback pushes it under. It is the figure that makes the risk of a rigid cost structure readable.

Worked example: a workshop with €30,000 of fixed costs a year sells a product for €50 with a variable cost of €20. The contribution margin is 50 − 20 = €30 per unit, so break-even arrives at 30,000 / 30 = 1,000 units, or €50,000 of turnover. Selling 1,300 units gives a profit of 30 × 1,300 − 30,000 = €9,000, with a margin of safety of 300 units, 23.08% of the expected volume.

Common mistakes

Treating a cost as variable when it is fixed in the short run: a salary does not change with units sold, so it belongs to fixed costs even if it is a production cost.
Mixing periods: yearly fixed costs against monthly sales produce a break-even point that means nothing.
Using the price including VAT or sales tax: the calculation needs the net revenue the business keeps, not the tax that merely passes through it.
Stopping at the number of units without looking at the margin of safety: two businesses can share a break-even point and carry very different risk.

Frequently asked questions

What is the break-even formula?

Q* = FC / (p − v), where FC is the fixed cost of the period, p the selling price per unit and v the variable cost per unit. The difference p − v is the contribution margin per unit.

How do I calculate break-even in revenue rather than units?

Multiply the break-even units by the price, or divide fixed costs by the contribution margin ratio. With €30,000 of fixed costs and a 60% margin, break-even revenue is 30,000 / 0.60 = €50,000.

How do I include a target profit?

Add the profit you want to the fixed costs: units become (FC + profit) / (p − v). To make €9,000 with a €30 margin and €30,000 of fixed costs you need 1,300 units.

What if the variable cost is higher than the price?

Every unit sold deepens the loss and no volume ever breaks even. The only options are to raise the price, cut the variable cost, or drop the product.

Does break-even analysis work for services?

Yes. Instead of units you count billable hours, active subscriptions or clients served, and the variable cost is what it takes to deliver one more unit of the service.

How this calculation works

Q* = FC / (p − v). FC is the fixed cost of the period, p the selling price per unit and v the variable cost per unit; p − v is the contribution margin per unit and (p − v) / p the contribution margin ratio. Break-even revenue is Q* × p. For an expected volume Q, profit is (p − v) × Q − FC and the margin of safety is (Q − Q*) / Q. For a target profit P, replace FC with FC + P.

ROI (return on investment)

Net gain, percentage return and annualised return of an investment.

Markup and margin

Selling price from cost and markup or margin, with both figures.

NPV and IRR

Net present value, internal rate of return and payback period of an investment.

Financial ratios

ROE, ROI, ROS, gearing and liquidity ratios.