Find exactly how many units you need to sell — and how much revenue you need — to cover all your costs. Add a profit target to see what it takes to hit your goals.
The break-even point is where total revenue equals total costs — no profit, no loss. The formula is: Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit). The denominator is called the contribution margin — how much each sale "contributes" toward covering fixed costs.
Fixed costs stay the same regardless of how much you sell — rent, salaries, software subscriptions, insurance. Variable costs scale directly with each unit sold — raw materials, packaging, payment processing fees, shipping. Knowing which is which is the foundation of break-even analysis.
Contribution margin (CM) = Selling Price − Variable Cost per Unit. It's the amount each sale contributes to covering fixed costs and eventually generating profit. The CM ratio (CM ÷ Selling Price) tells you what percentage of every dollar in revenue is available to cover fixed costs — a higher ratio means you need fewer sales to break even.
Break-Even Units = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit). To find break-even revenue: Break-Even Revenue = Fixed Costs ÷ Contribution Margin Ratio, where CM Ratio = (Price − Variable Cost) ÷ Price.
It tells you the minimum sales volume needed to avoid a loss. Below the break-even point, every unit sold reduces your loss. Above it, every unit generates profit equal to its contribution margin. It helps with pricing decisions, cost control, and evaluating business viability.
Add your profit target to fixed costs in the formula: Required Units = (Fixed Costs + Target Profit) ÷ Contribution Margin per Unit. This tells you how many units you need to sell not just to break even, but to hit your specific profit goal.