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.
Frequently asked questions
What are fixed costs?
Costs that stay the same regardless of how many units you sell — rent, salaries, software subscriptions, insurance.
What are variable costs?
Costs that change with each unit sold — materials, shipping, payment processing fees, commissions.
How do I lower my break-even point?
Either reduce fixed costs, reduce variable costs, or increase your sale price. Reducing fixed costs has the biggest impact.