# Break-Even Calculator Calculate how many units you need to sell - and how much revenue you need to generate - before your business starts making a profit. Canonical page: https://invoicemama.com/calculators/break-even-calculator This is a free browser calculator. Treat results as planning aids and confirm figures against your own measurements, codes, and professional judgment. ## How to use this break-even calculator Enter fixed costs, variable cost per unit, and selling price to calculate break-even units, break-even revenue, contribution margin, and contribution margin ratio. Optionally add a sales volume target to see profit or loss at that level. ### 1. Enter your fixed costs Add up all costs that stay the same regardless of sales: rent, salaries, insurance, subscriptions, loan repayments. Enter the total for the period you are analyzing (for example, per month). ### 2. Enter variable cost per unit Enter what it costs you to produce or deliver one unit: materials, packaging, shipping, per-unit labor. This must be lower than your price. If it is not, the model loses money on every sale before fixed costs. ### 3. Enter your selling price per unit Enter the price a customer pays for one unit of your product or service. The break-even calculator returns break-even units, break-even revenue, contribution margin, and contribution margin ratio. ### 4. Optionally add a sales volume target Enter how many units you plan or expect to sell. The calculator shows projected profit or loss at that volume and marks the point on the break-even chart. ## Frequently asked questions ### What is a break-even point and why does it matter? The break-even point is the sales volume (or revenue) where total revenue equals total cost, so profit is zero. It matters because it is the minimum you must sell to stop losing money on operations, and every unit beyond that adds to profit. From 1994 through 2021, about 49.2 percent of new employer establishments reached five years (U.S. Small Business Administration Office of Advocacy, 2024, citing ABS and BED data). Knowing your break-even helps you price, budget, and plan with a clear floor instead of guessing. ### How do you calculate break-even point in units? Break-even units equal fixed costs divided by contribution margin per unit, where contribution margin per unit is price minus variable cost per unit. Example: $5,000 fixed costs, $12 variable cost, $30 price gives contribution margin $18, so break-even units = 5,000 / 18, or about 278 units. Once fixed costs are covered, each additional unit adds contribution margin to profit. ### What is contribution margin and how is it different from profit? Contribution margin is the amount left from each sale after variable costs and before fixed costs. Gross profit, in common usage, is revenue minus cost of goods sold; operating profit then subtracts operating expenses. Contribution margin per unit answers how much each sale contributes toward fixed costs and profit. The contribution margin ratio is contribution margin divided by price. A 40 percent ratio means $0.40 of each revenue dollar is available to cover fixed costs and profit after variable costs. ### What counts as a fixed cost vs. a variable cost? Fixed costs do not change with output in the short run: rent, salaried wages, insurance, many subscriptions, loan repayments, and depreciation schedules you treat as fixed. Variable costs move with output: raw materials, piece-rate labor, packaging, shipping per order, and per-unit commissions. Some costs are mixed. For break-even analysis, split mixed costs into a fixed base and a per-unit variable portion so your break-even calculator inputs stay consistent. ### What is break-even revenue and how do I calculate it? Break-even revenue is the dollar sales you need to cover all costs at zero profit. It equals break-even units times price per unit. You can also compute it as fixed costs divided by the contribution margin ratio when you work in percentages. Both approaches match when your inputs use the same time period and definitions. ### What does a high or low contribution margin ratio mean for my business? A high contribution margin ratio means variable costs eat a smaller share of price, so each sale funds fixed costs faster. A low ratio means you need more volume to cover overhead. There is no single correct ratio for every business; what matters is whether your expected volume clears break-even at your real costs and price. Compare your ratio to your own history and to peers in the same industry when you benchmark. ### How do I use the break-even calculator for a service business with no physical units? Define one unit as whatever you sell in repeatable chunks: an hour, a project, a visit, or a client month. Example: $3,000 monthly fixed costs, $120 revenue per cleaning, $40 variable cost per cleaning gives contribution margin $80, so break-even is 3,000 / 80 = 37.5 jobs per month. The break-even calculator uses the same math once your unit is defined. ### What happens to my break-even point if I change my price? A higher price raises contribution margin per unit, so break-even usually falls if costs stay flat. A lower price does the reverse. In one illustrative example, if price is $100, variable cost is $70, and contribution margin is $30 (30 percent of price), then a 10 percent price cut to $90 drops contribution margin to $20. To hold the same total contribution dollars as before, you need 50 percent more units (because 1.5 * $20 = $30). Always recompute break-even after price moves. ### Can I use break-even analysis before launching a new product or business? Yes. Enter projected fixed costs, estimated variable costs per unit, and planned price to see required volume at break-even. Then compare that volume to what you can realistically sell. If break-even needs far more demand than your market can support, you may need a different price, lower costs, or a different offer before you launch. ### How does break-even analysis relate to profit margin? Break-even analysis finds the volume where profit crosses from negative to zero. Profit margin measures how much you keep per dollar of revenue after costs at a given volume above break-even. Use a break-even calculator for the floor, then use margin tools to judge earnings quality above that floor. ### Does break-even analysis account for taxes? Classic break-even uses pre-tax figures. For after-tax targets, adjust your required profit by tax rate with help from a tax professional. Example: to net $10,000 after a 25 percent rate on the margin above break-even, you solve pre-tax needs with your accountant's model. For day-to-day pricing, pre-tax break-even is still a strong guide. ### What is the margin of safety and how do I calculate it? Margin of safety is actual or projected sales minus break-even sales. As a percent of actual sales, it is (actual minus break-even) divided by actual, times 100. It shows how far demand can fall before losses start. It is a simple risk gauge on top of break-even units or revenue. ## Know Your Break-Even. Now Send Invoices That Get You There. You've done the math - now make sure every sale is tracked and invoiced properly. Invoice Mama helps small businesses and freelancers create professional invoices in seconds with AI. No templates, no hassle. Just describe the job and send. - [Create your first invoice free](https://app.invoicemama.com/sign-up) --- Invoice Mama is invoicing software for contractors, freelancers, and small businesses. It is not a tax, legal, or accounting firm. For current pricing, use the live pricing page. **More:** [Home](https://invoicemama.com/) - [Pricing](https://invoicemama.com/pricing) - [Guides](https://invoicemama.com/guides) - [Tools](https://invoicemama.com/tools) - [Calculators hub](https://invoicemama.com/calculators)