Break-Even Calculator

Contribution margin is the number that matters

Every unit sold brings in its price and costs you its variable cost. What remains contributes to fixed costs, and once fixed costs are covered, to profit. Break-even units is simply fixed costs divided by contribution margin per unit. If contribution margin is zero or negative, no volume ever breaks even — selling more makes things worse, which is worth knowing before scaling.

Fixed and variable are about behaviour, not category

A cost is fixed if it does not change when you sell one more unit this period. Rent is fixed; payment processing fees are variable. Salaries are usually fixed in the short run and step up in blocks as you grow, which is why break-even analysis holds over a range of volume rather than universally. Misclassifying a stepped cost as purely fixed is the most common error here.

Margin of safety tells you how much room you have

It is the gap between current sales and break-even, expressed as a percentage of current sales. A 20 per cent margin of safety means sales can fall by a fifth before you start losing money. It is a more useful risk measure than profit alone, because two businesses with identical profit can have very different exposure to a downturn depending on their cost structure.

Frequently Asked Questions