How to Calculate Your Break-Even Point

The two cost types

Fixed costs happen whether you sell anything or not: rent, insurance, subscriptions, a salary you pay yourself. Variable costs only happen per sale: materials, packaging, transaction fees, shipping.

Separating them is the whole job. If you can't say which costs follow each sale, your break-even number will be wrong.

Contribution per unit

Contribution = selling price − variable cost per unit. It's the amount each sale contributes toward paying off the fixed costs.

A product sold at 25 with a variable cost of 10 contributes 15 per unit. If it costs more to make one than you can sell it for, contribution is zero or negative and no sales volume will ever fix it — that's a pricing problem, not a marketing one.

The break-even calculation

Units to break even = fixed costs ÷ contribution per unit, rounded up, because you can't sell a fraction of a unit.

With 1,000 of fixed costs and 15 of contribution: 1,000 ÷ 15 = 66.7, so 67 units. At 25 each, that's revenue of 1,675. The 67th unit is the first one that isn't paying for the fixed costs.

If your costs are monthly and your sales are monthly, the answer is a quantity per month — the same number, read as time.

Why the number moves so much with price

Raising the price by 1 (to 26) lifts contribution from 15 to 16, and break-even drops from 67 units to 63. Cutting the price by 1 (to 24) drops contribution to 14 and pushes break-even to 72 units.

That asymmetry is the argument against discounting as a growth tactic: a small price cut requires a disproportionately large volume increase just to stand still. Run both directions before you commit to a promotion.

Get your own number

Enter fixed costs, variable cost per unit and selling price into the Break-Even Calculator and it returns the units needed and the revenue at that quantity.

Then test it against reality: divide the units by how many you can genuinely sell in a month. If the answer is "in fourteen months," you've found the problem before you spent the money.