What is a break-even point?
- The break-even point is the number of units you must sell before you start making a profit.
- Below break-even, every sale reduces your loss. Above it, every sale is pure profit contribution.
- Knowing your break-even point is essential before launching any product or service.
How to calculate break-even
The formula is: Break-even units = Fixed costs ÷ (Sale price - Variable cost per unit)
The difference between sale price and variable cost is called the contribution margin — what each sale contributes toward covering your fixed costs.
Example: if fixed costs are €5,000, price is €50 and variable cost is €20, the contribution margin is €30 and break-even is 5000 ÷ 30 = 167 units.
Getting your inputs right
The formula is simple — the hard part is classifying costs correctly. A cost is fixed if it doesn't change whether you sell one unit or a thousand (rent, salaries, software subscriptions). It's variable if it scales with each sale (materials, packaging, a per-transaction payment fee). Costs that sit in between, like a part-time contractor paid by the hour but capped at a set number of hours, usually get treated as fixed for a simple break-even estimate — note the simplification rather than ignoring it.
The fixed costs people forget to count
Rent and salaries are obvious. The ones that quietly get left out are software subscriptions, accounting or legal fees, equipment maintenance, and permits or licenses — each one small on its own, but they add up to a real chunk of your actual fixed costs. Leaving them out doesn't make the formula wrong, it makes the fixed-costs number you're feeding into it too low, which makes your break-even point look lower — and closer — than it really is.
What happens after you hit break-even
Every unit sold past your break-even point contributes its full margin straight to profit, since fixed costs are already covered. This is why small increases in sales volume above break-even move profit faster than the same increase would below it — worth keeping in mind when deciding whether a push for more volume or a price increase gets you to a profit target faster.
Run the "what if" scenarios before you commit
The real value of this calculator isn't the one number it gives you — it's running it a few times with different assumptions before you commit to a price or a cost structure. Raise the price by 10% and see how many fewer units you'd need to sell. Add a new fixed cost, like a tool subscription or a part-time hire, and see how many extra units that decision requires just to stay even. A break-even number that only gets calculated once, at launch, and never revisited is far less useful than one you check every time a real cost or price changes.