Calculate your break-even point in units and revenue. Find out how many units you need to sell to cover your costs and start making profit.
Calculate your break-even point in units and revenue. Find out how many units you need to sell to cover your costs and start making profit.
Generated: 1/13/2026, 3:16:21 AM | AskSMB.io
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Break-even analysis calculates the sales volume at which a business's revenues exactly equal its costs. It answers the critical question: "How many units must I sell before I start making money?" This analysis is essential for pricing decisions, financial planning, and understanding business viability.
Knowing your break-even point helps you: (1) Set realistic sales targets, (2) Make informed pricing decisions, (3) Understand the impact of cost changes, (4) Plan for growth and expansion, (5) Evaluate new products or services before launch, (6) Secure financing by demonstrating business viability, and (7) Make strategic decisions about scaling your operations.
The break-even formula is: Break-Even Units = Fixed Costs ÷ Contribution Margin. Where Contribution Margin = Selling Price - Variable Cost per Unit. This tells you exactly how many units you need to sell to cover all your costs. Break-Even Revenue is calculated by multiplying break-even units by your selling price.
Contribution margin is the amount each unit sale contributes to covering fixed costs and generating profit. It's calculated as Selling Price minus Variable Cost per Unit. The contribution margin ratio (percentage) shows what portion of each dollar of sales contributes to fixed costs. A higher contribution margin means you need to sell fewer units to break even.
Pricing directly impacts your break-even point. Increasing your price (while maintaining demand) raises your contribution margin and lowers your break-even point - you need to sell fewer units. Decreasing your price increases your break-even point - you need to sell more units. The key is finding the optimal price that balances volume and margin to maximize profitability.
Break-even analysis is a fundamental financial tool that helps small business owners understand the minimum sales volume needed to cover all costs. This calculator determines the exact point where your total revenue equals your total costs, meaning you're neither making a profit nor incurring a loss.
Where:
Contribution margin: $50 - $20 = $30 Break-even units: $5,000 ÷ $30 = 167 Break-even revenue: 167 × $50 = $8,350