Break-Even Calculator
Calculate your break-even point, margin of safety, and time to profitability. Includes advanced multi-product analysis and monthly projections
Break-Even Analysis
Calculate your break-even point and margin of safety with detailed projections
Your Business Data
Rent, salaries, insurance, etc.
Materials, shipping, processing fees
For margin of safety calculation
Expected growth rate
Get comprehensive break-even analysis with margin of safety and time projections
💡 Quick Tip
Break-even is when total revenue equals total costs. Every sale after that is pure profit!
What is Break-Even Analysis?
Break-even analysis is a fundamental financial tool that determines when your business will become profitable. It calculates the point where total revenue equals total costs - meaning you're no longer losing money, but not yet making profit.
The Break-Even Formula
Break-Even Units = Fixed Costs ÷ (Selling Price - Variable Cost)Example: Coffee shop with $10,000 monthly fixed costs (rent, salaries, utilities)
• Selling price per coffee: $5
• Variable cost per coffee: $2 (beans, milk, cup)
• Contribution margin: $5 - $2 = $3
• Break-even: $10,000 ÷ $3 = 3,334 coffees per month (111 per day)
Why Break-Even Analysis Matters
- • Sets realistic sales targets - Know exactly what revenue you need
- • Informs pricing decisions - Understand minimum viable prices
- • Evaluates business viability - Can you realistically sell that many units?
- • Guides cost management - Shows impact of cost changes
- • Supports fundraising - Investors want to see path to profitability
Key Break-Even Concepts
Fixed Costs
Expenses that remain constant regardless of sales volume. They don't change whether you sell 0 units or 10,000 units.
- • Rent: Office, store, warehouse space
- • Salaries: Full-time employee wages
- • Insurance: Business, liability, property
- • Software: Monthly subscriptions
- • Utilities: Base costs for electricity, internet
Variable Costs
Expenses that scale directly with production or sales. More sales = higher variable costs.
- • Materials: Raw materials, ingredients, supplies
- • Packaging: Boxes, labels, wrapping
- • Shipping: Delivery costs per order
- • Payment fees: 2-3% per transaction
- • Commissions: Sales commissions per deal
Contribution Margin
The amount each sale contributes toward covering fixed costs. After fixed costs are covered, it becomes pure profit.
Formula:
Selling Price - Variable Cost = CM per UnitRatio:
CM per Unit ÷ Selling Price × 100 = CM %Margin of Safety
The cushion between your actual sales and break-even point. Shows how much sales can drop before you start losing money.
Strong buffer, low risk
Acceptable, monitor closely
Vulnerable to downturns
When to Use Break-Even Analysis
Startup Launch
- ✓Validate business model viability
- ✓Set initial sales targets
- ✓Plan fundraising needs
- ✓Estimate time to profitability
Pricing Decisions
- ✓Test impact of price changes
- ✓Find minimum viable price
- ✓Evaluate discount strategies
- ✓Compare pricing models
New Product Launch
- ✓Determine product viability
- ✓Set launch volume targets
- ✓Justify development costs
- ✓Plan marketing budget
Expansion Plans
- ✓Evaluate new location ROI
- ✓Calculate additional sales needed
- ✓Assess market entry feasibility
- ✓Plan resource allocation
Cost Changes
- ✓React to supplier price increases
- ✓Evaluate equipment investments
- ✓Test hiring decisions
- ✓Assess automation ROI
Financial Planning
- ✓Set realistic growth targets
- ✓Plan cash flow needs
- ✓Build safety buffers
- ✓Prepare investor presentations
Frequently Asked Questions
What's a good margin of safety?
20%+ is considered healthy, meaning sales can drop 20% before you hit break-even. 10-20% is acceptable for stable businesses. Below 10% indicates high risk and vulnerability to market fluctuations. If you're negative, you're operating at a loss.
Should I include depreciation in fixed costs?
For accounting break-even, yes. For cash break-even (more useful for startups), exclude depreciation since it's non-cash. Cash break-even shows when your business generates positive cash flow, which is more important for survival than accounting profitability.
How do I classify semi-variable costs?
Split them into fixed and variable components. Example: A phone plan with $50 base + $0.10 per call. Include $50 in fixed costs and $0.10 per call in variable costs. Same for utilities - base cost is fixed, usage-based portion is variable.
What's the break-even point for multiple products?
Use weighted averages based on your sales mix. If you sell 50% Product A ($100, $60 cost), 30% Product B ($50, $30 cost), 20% Product C ($30, $15 cost), calculate weighted average price and cost, then apply standard formula. Our advanced calculator does this automatically.
How often should I recalculate break-even?
Recalculate whenever: (1) Prices change, (2) Costs change significantly, (3) You add/remove fixed expenses, (4) Product mix shifts, or (5) Market conditions change. At minimum, review quarterly and whenever making major business decisions.
Can I lower my break-even point?
Yes, four ways: (1) Reduce fixed costs (renegotiate rent, optimize staffing), (2) Reduce variable costs (better supplier terms, economies of scale), (3) Increase prices (if market allows), (4) Improve product mix toward higher-margin items. Even small improvements have big impact.
Plan Your Path to Profitability
Understanding your break-even point is crucial. Now optimize your customer feedback to reach profitability faster with better reviews and testimonials.