How many units do I need to sell for a target profit?

Add the target profit to the fixed costs and divide by the contribution margin per unit. Start from $5,000 of fixed costs, add a $2,000 target profit and divide by $20: $7,000 / $20 = 350 units, or $17,500 of sales. Enter the profit under More options and the calculator adds both numbers to the result.

Are break-even and ROI the same?

No. The break-even point is the sales level where profit is zero within a period, while ROI measures the return on money you invested, as a percentage. The shop in the example breaks even at $12,500 of monthly sales. Whether its $30,000 startup investment pays off is an ROI question, which you answer once the profit is known.

What counts as a fixed cost and what as a variable cost?

Fixed costs stay the same within the period no matter how much you sell: rent, insurance, software, loan interest, salaries and depreciation. Variable costs rise with every sale: purchase price, materials, packaging, shipping, card fees and commission. Leave $5 of shipping per unit out of the variable cost and the example seems to break even at 200 units instead of the real 250.

How can I lower my break-even point?

Raise the price, lower the variable cost per unit or cut the fixed costs. In the example each lever brings the break-even point from 250 to 200 units: a price of $55, a variable cost of $25 or fixed costs of $4,000 a month. Check that a higher price does not cost you more sales than it saves.

How do I calculate the break-even point in Excel?

Put the fixed costs in A1, the price in B1 and the variable cost per unit in C1, then use =A1/(B1-C1) for the break-even units and =A1/((B1-C1)/B1) for the break-even sales. With $5,000, $50 and $30 that returns 250 and $12,500. Wrap the first formula in ROUNDUP(...,0) to get whole units.

What are the parts of a break-even analysis?

Five numbers: fixed costs, the variable cost per unit, the selling price, the contribution margin (price minus variable cost) and the break-even point that follows from them. In the example that is $5,000, $30, $50, $20 and 250 units. Add expected sales and you also get the margin of safety, 37.5% at 400 units, which shows how much room the plan has.

What happens if the price is lower than the variable cost?

Then there is no break-even point. Each sale adds to the loss instead of covering fixed costs, so selling more makes it worse. A $28 price with $30 of variable costs loses $2 per unit before any rent is paid. The calculator still draws the chart, where the revenue and cost lines never cross, and shows the price it takes: above $30, or $42.50 to break even at 400 units with $5,000 of fixed costs.

Break-Even Calculator: Break-Even Point in Units and Sales

Reviewed by Gianni Van Schoor

Break-even point = fixed costs / (selling price - variable cost per unit): the number of units you must sell before you make a profit.

Break-even chart

Result

Per unit
Per month

Break-even point250 units$12,500 in sales

Contribution margin per unit

$20

Contribution margin ratio

40%

Break-even point = fixed costs / (selling price - variable cost per unit), rounded up to a whole unit.

About this break-even calculator

This break-even calculator shows how much you need to sell before a business, product or side project starts making money. The Per unit tab takes your fixed costs, selling price and variable cost per unit and returns the break-even point in units and in sales, plus the contribution margin. The From revenue tab does the same for businesses that track revenue and total variable costs instead of units, such as agencies, shops and consultants. Under More options you can add expected sales for the margin of safety, profit and break-even day, and a target profit to see the sales it takes to reach it. If your sales fall short, the calculator shows how much of the fixed costs they cover, how many extra units or sales you need and the price that would break even.

How the break-even formula works

The contribution margin per unit is the selling price minus the variable cost: $50 - $30 = $20. The break-even point divides the fixed costs by it: $5,000 / $20 = 250 units. The contribution margin ratio is $20 / $50 = 40%, so break-even sales are $5,000 / 0.40 = $12,500. At 400 expected units, sales are $20,000, the margin of safety is $7,500 or 37.5%, and the profit is $20,000 x 0.40 - $5,000 = $3,000. The break-even day is $12,500 / $20,000 x 30 = 18.75, so day 19 of the month. A $2,000 target profit needs ($5,000 + $2,000) / $20 = 350 units.

Practical tips and supporting tools

What this break-even calculator does

Pick a tab first. Per unit is for anything you sell by the piece: products, meals, tickets, subscriptions or hours. Enter the fixed costs for a month or a year, the selling price and the variable cost of one unit. From revenue is for businesses that know their total revenue and total variable costs, but not one price per unit. Both tabs show the break-even sales, the contribution margin ratio and a chart of revenue and total costs, where the two lines cross at the break-even point. In the Per unit tab, open More options to add expected units and a target profit; the From revenue tab measures those results against your revenue itself and offers only the target profit under More options.

Worked example

A small online shop has $5,000 of fixed costs a month for rent, software and a part-time salary. It sells a product for $50 that costs $30 to buy, pack and ship. Each sale leaves a contribution margin of $20, a ratio of 40%, so the shop breaks even at 250 units or $12,500 in sales a month. If it expects to sell 400 units, the margin of safety is 37.5% ($7,500), the profit is $3,000 and the break-even point is reached on day 19 of the month. To earn $2,000 profit it has to sell 350 units, or $17,500.

Break-even in units versus break-even in sales

The break-even point in units tells you how many items you must sell: 250 in the example. The break-even point in sales (in dollars) tells you how much revenue that is: 250 x $50 = $12,500. Both describe the same point. Units are easier to plan with when you sell one product. Sales are the only option when you sell many products at different prices, which is why the From revenue tab works with the contribution margin ratio instead: with a 40% ratio every $1 of sales covers $0.40 of fixed costs, so $5,000 / 0.40 = $12,500.

Fixed costs versus variable costs

Fixed costs stay the same whether you sell 0 or 1,000 units in the period: rent, insurance, software subscriptions, loan interest, salaries and your own pay if you take a fixed amount. Variable costs grow with every sale: materials, purchase price, packaging, shipping, card fees and sales commission. Some costs are a mix, such as electricity in a bakery, so split them into a fixed base and a part per unit. Getting this split right matters more than any formula: leaving $5 of shipping per unit out of the variable cost makes the example's break-even point look like 200 units instead of the real 250.

When in the month or year you break even

With expected sales or a revenue figure, the calculator also shows the break-even day: the day on which the sales so far have covered all fixed costs of the period. It assumes sales are spread evenly and counts 30 days in a month and 365 in a year. At $12,500 break-even sales out of $20,000 expected, that is 62.5% of the month, or day 19. Over a year with $60,000 fixed costs, $240,000 revenue and $144,000 variable costs, the break-even sales are $150,000, reached on day 229, in month 8. A seasonal business, such as a garden center that earns most in spring, reaches it earlier or later than this even-spread estimate.

What the calculator shows when you fall short

When your expected sales or revenue stay below the break-even point, the result shows how far you are from it. A bar splits the fixed costs into the part your sales cover and the part that stays open, and the What it takes to break even block lists what is missing. Take a month with $10,000 of revenue and $6,000 of variable costs in the From revenue tab: the 40% ratio leaves $4,000, which covers 80% of the $5,000 fixed costs, so the month ends with a $1,000 loss. You need $2,500 more revenue to reach $12,500, or variable costs of $5,000 instead of $6,000 at the same revenue. In the Per unit tab the block shows the extra units and the selling price that breaks even at your expected volume. When the price does not even cover the variable cost, there is no break-even point at all, and the block shows the price you have to stay above.

How to lower your break-even point

There are three levers, and in the example each one brings the break-even point from 250 down to 200 units. Raise the price from $50 to $55, so each unit contributes $25 instead of $20. Cut the variable cost from $30 to $25, for example with a cheaper supplier or lower shipping rates. Or cut the fixed costs from $5,000 to $4,000 a month. A price increase works fastest on paper, but check that you keep enough customers: if sales fall below the new break-even point, the higher price did not help.

How to use the calculator in four steps

Choose the period and add up all fixed costs for that month or year.
Enter the selling price and variable cost per unit, or switch to From revenue and enter totals.
Read the break-even point, the contribution margin and the chart.
Open More options, enter your expected sales and a target profit, and check how much room you have.

When this calculator is most useful

Starting a business: see how many customers you need each month before the first dollar of profit.
Setting a price: compare the break-even point at $45, $50 and $55 before you pick one.
Taking on a fixed cost: check how many extra units a new hire or a bigger workshop requires.
Writing a business plan: banks and investors expect a break-even analysis with a margin of safety.

Common mistakes to avoid

Using prices including sales tax: the tax is not yours, so enter prices and revenue without it.
Forgetting your own salary: if you need $3,000 a month to live, count it as a fixed cost or as a target profit.
Mixing periods: monthly fixed costs with yearly revenue make the result 12 times too optimistic.
Treating the result as a sales forecast: the break-even point is a minimum, not a prediction of what you will sell.

What this calculator does not do

It assumes one price and one variable cost per unit; with several products, use the From revenue tab with totals.
It does not include income tax on the profit or a cash buffer for slow months.
It does not tell you how long it takes to earn back a one-off startup investment; it works per month or year.

Supporting calculators

Price and margin: use the Margin Calculator to turn a cost price into a selling price with the margin or markup you need.
Return on the investment: use the ROI Calculator to measure the total and yearly return once the business makes a profit.
Price changes: use the Percentage Calculator to work out the percentage increase or decrease of a new price or cost.

Learn more

From cost to price: read the Pricing Math Guide to see how cost price, margin, discount and sales tax add up to a selling price.

Glossary and common break-even questions

The break-even point is the sales level at which total revenue exactly covers total costs, so the business makes neither a profit nor a loss. Below it every period ends in a loss, above it every extra sale adds profit. It can be stated in units or in sales. A shop with $5,000 of fixed costs a month that sells a $50 product with $30 of variable costs breaks even at 250 units, which is $12,500 of sales. Unit 251 is the first one that earns money: $20 of profit, the contribution margin of one unit. The point moves whenever a cost or the price changes, so it is worth recalculating after a rent increase, a new supplier or a price change. It is a minimum to plan around, not a forecast of what you will actually sell.

Divide your fixed costs by the contribution margin per unit, which is the selling price minus the variable cost per unit. With $5,000 of fixed costs, a $50 price and $30 of variable costs, the break-even point is $5,000 / ($50 - $30) = 250 units. To get the break-even point in dollars, multiply by the price (250 x $50 = $12,500), or divide the fixed costs by the contribution margin ratio: $5,000 / 0.40 = $12,500. The calculator rounds units up, because you cannot sell part of a product: with $20 of variable costs, $5,000 / $30 is 166.67, which means 167 units. If you only know your revenue and total variable costs, use the From revenue tab: $20,000 revenue with $12,000 of variable costs gives a 40% ratio and the same $12,500 break-even sales. Fixed costs and revenue must cover the same period, both monthly or both yearly.

The contribution margin ratio is the share of every dollar of sales that is left after variable costs, available to pay fixed costs and then profit. It is the contribution margin divided by the price, or total contribution margin divided by revenue. A product priced at $50 that costs $30 in variable costs leaves $20, a ratio of $20 / $50 = 40%. For a whole business with $20,000 of revenue and $12,000 of variable costs, the ratio is $8,000 / $20,000, also 40%. The ratio is the key to break-even sales: dividing $5,000 of fixed costs by 0.40 gives $12,500. A higher ratio means each sale covers more of the fixed costs, so the break-even point is lower. It differs from the gross profit margin, which deducts the cost of goods sold but often leaves out variable selling costs such as shipping, card fees and commission.

The margin of safety is how far your expected or actual sales sit above the break-even point, shown as an amount and as a percentage of sales. It tells you how much sales can drop before you start losing money. With 400 expected units at $50, sales are $20,000. The break-even sales are $12,500, so the margin of safety is $7,500, or 37.5% of sales: sales can fall by more than a third before the business makes a loss. In the From revenue tab, $20,000 of revenue with $12,000 of variable costs gives the same 37.5%. At 200 units the margin of safety turns negative, -$2,500 or -25%. A margin of safety of 10% leaves little room for a slow month, while 30% or more gives a comfortable buffer. Banks and investors often look at this figure in a business plan, because it shows how fragile the plan is.

Then the period ends in a loss, and the calculator shows what is missing. At 200 expected units instead of 250, the shop is 50 units or $2,500 of sales short. Those 200 units contribute 200 x $20 = $4,000, which covers 80% of the $5,000 fixed costs; the uncovered $1,000 is the loss. The bar under the result shows the covered and the uncovered share, and the result lists the extra units you need and the price that breaks even at your volume: $30 + $5,000 / 200 = $55. In the From revenue tab it shows the extra sales you need and the variable costs at which your revenue would break even.

Within one period, the calculator answers it with the break-even day: the day on which sales so far have covered all fixed costs of the month or year, assuming sales are spread evenly. With $12,500 break-even sales and $20,000 of expected sales a month, you break even after 62.5% of the month, on day 19 of 30. Over a year with $150,000 break-even sales and $240,000 revenue, it is day 229, in month 8. Every sale after that day is profit for the rest of the period. A seasonal business reaches it earlier or later than this estimate. A different question is how many months it takes to earn back a one-off startup investment, such as $30,000 for equipment: divide that amount by the monthly profit. At $3,000 profit a month that is 10 months, which the calculator does not compute for you.

Use the From revenue tab when you sell hours, projects or many different products. Enter the fixed costs, the revenue for the period and the variable costs that come with that revenue, such as freelancers, materials or payment fees. A consultancy with $5,000 of fixed costs, $20,000 of monthly revenue and $12,000 of variable costs has a 40% contribution margin ratio and breaks even at $12,500 of revenue. If you bill by the hour, you can also use the Per unit tab with one hour as the unit: at $100 an hour and $20 of variable cost per hour, $5,000 of fixed costs is covered after 63 billable hours.

Break-Even Calculator: Break-Even Point in Units and Sales