Break-Even Calculator
Calculate how many units you need to sell to cover all your costs.
Rent, salaries, insurance, etc.
Materials, labor per unit, etc.
What you charge customers
Break-Even Analysis
0
Units to Break Even
Total Revenue at Break-Even:
$0.00
Contribution Margin per Unit:
$0.00
Formula: Break-Even Units = Fixed Costs / (Price - Variable Cost)
Understanding Break-Even Analysis
Break-even analysis is a critical tool for understanding when your business or product becomes profitable. It shows you exactly how many units you need to sell before you start making money.
Key Concepts
- Fixed Costs: Expenses that don't change with production volume (rent, salaries, insurance)
- Variable Costs: Expenses that increase with each unit produced (materials, shipping, commissions)
- Contribution Margin: The amount each unit sale contributes to covering fixed costs (Price - Variable Cost)
- Break-Even Point: The number of units where total revenue equals total costs
Why Break-Even Analysis Matters
- Business Planning: Know your minimum sales target before launching
- Pricing Decisions: See how price changes affect profitability
- Cost Management: Understand the impact of reducing fixed or variable costs
- Risk Assessment: Evaluate whether a business idea is viable
- Goal Setting: Set realistic sales targets for your team
Example Scenario
Small Coffee Shop:
- Fixed Costs: $5,000/month (rent, salaries, utilities)
- Variable Cost per Cup: $1.50 (coffee, milk, cup, etc.)
- Selling Price: $5.00 per cup
- Break-Even: 1,429 cups per month (about 48 cups per day)
Improving Your Break-Even Point
- Reduce fixed costs (negotiate rent, automate processes)
- Lower variable costs (bulk purchasing, efficient production)
- Increase selling price (if market allows)
- Improve contribution margin through product mix