Business
How to calculate your break-even point
Break-even is the point where sales have paid for everything and profit starts.
Fixed costs, like rent, insurance, software and your own base wage, don't change with sales. Variable costs, like materials, packaging, payment fees and shipping, rise with every unit sold. The difference between the price and the variable cost is the contribution each sale makes towards fixed costs.
Worked example
| Item | Value |
|---|---|
| Fixed costs per month | $6,000 |
| Price per unit | $25 |
| Variable cost per unit | $10 |
| Contribution per unit | $15 |
| Break-even units | 6,000 ÷ 15 = 400 |
| Break-even sales | 400 × $25 = $10,000 |
What moves the target
| Change | New contribution | New break-even units |
|---|---|---|
| Price up to $28 | $18 | 334 |
| Variable cost down to $8 | $17 | 353 |
| Fixed costs up to $7,500 | $15 | 500 |
💡 Pro Tip: A small price rise often moves break-even more than cost cutting. Test what customers will accept.
✨ Key Takeaways
- Break-even units = fixed costs ÷ (price − variable cost).
- Contribution per unit is the number to watch.
- Re-check whenever prices or costs change.
Open the break-even calculator →
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