Is break-even calculated on cash or accounting profit?

This version uses accounting costs. If some fixed costs are non-cash (like depreciation), your cash break-even is lower; if you must also fund loan principal repayments, your cash break-even is higher. Adjust the fixed-cost figure to match the question you are asking.

Can break-even be negative or impossible?

If price is at or below variable cost, every sale loses money and no volume breaks even — the calculator flags this. There is no sales target that fixes a negative contribution; the price or the cost must change.

How does break-even work for services?

Treat one billable hour (or one project) as the 'unit': price is the rate, variable cost is the direct labor and per-job expenses, and fixed costs are monthly overheads. The math is identical.

Break-Even Calculator — Units & Revenue Needed

The most important number in a small business

Your break-even point is the sales volume at which total revenue exactly covers total costs — no profit, no loss. Below it you are paying to be in business; above it, every additional sale drops its full contribution margin into profit. It is the first calculation a new venture should run and the one an existing business should re-run whenever prices, rent or supplier costs change.

The break-even formula

Break-even units = Fixed costs ÷ (Price − Variable cost per unit)

The denominator is the contribution per unit — what each sale contributes toward fixed costs after covering its own variable cost. Break-even revenue is simply break-even units × price. All fixed costs must belong to the same period as the sales figure you compare against (monthly fixed costs ↔ monthly unit sales).

Sorting costs correctly

Fixed: rent, salaried staff, insurance, software, loan payments — owed even at zero sales.
Variable: materials, packaging, per-sale fees, hourly production labor, shipping — incurred per unit sold.
The grey zone: some costs step up at thresholds (a second employee, a bigger space). Model them as fixed at the level matching the volume you are testing.

Using break-even as a decision tool

Considering a price cut? It shrinks contribution per unit, so break-even volume rises — the calculator shows exactly how much extra volume the cut must generate just to stand still. Considering an ad campaign or a new hire? Add it to fixed costs and see the new hurdle. Break-even converts strategy arguments into arithmetic.

Worked example

Fixed costs are $10,000 a month. You sell at $50 with a $30 variable cost, so each unit contributes $20. Break-even = $10,000 ÷ $20 = 500 units, which is $25,000 of revenue. Sell 800 units and profit is 800 × $20 − $10,000 = $6,000. Sell 400 and you lose $2,000 — the same formula, running in both directions.

How to use this calculator

Add up fixed costs for one period (usually a month) — everything owed even with zero sales.
Enter your selling price per unit.
Enter the variable cost of one unit — materials, packaging, transaction fees.
Read break-even units and revenue; optionally enter expected sales to see the profit (or loss) at that volume.

Margin of safety

The gap between expected sales and break-even, as a percentage of expected sales, is your margin of safety. Above 30% is comfortable for most small businesses; under 10%, a single bad month puts you under water. If yours is thin, the levers are the same three the formula shows: raise price, cut variable cost, or cut fixed costs.

Break Even Calculator