Break-Even Calculator

Break-even is the sales volume where revenue exactly equals total costs - the point of zero profit and zero loss. Formula: break-even units = fixed costs ÷ (price per unit - variable cost per unit). So if fixed costs are £10,000/month, you sell at £20 per unit, and variable cost is £5 per unit: break-even = 10,000 ÷ (20-5) = 667 units per month. Below 667 = loss. Above 667 = profit.

The contribution margin (price minus variable cost) is what each sale 'contributes' toward covering fixed costs. £15 contribution per unit × 667 units = £10,000 covering all fixed costs. The 668th unit is your first profitable sale. Useful for: pricing decisions, validating new product viability, understanding minimum sales targets, evaluating whether a business is sustainable.

Fixed costs don't change with sales volume: rent, insurance, salaries, software subscriptions, equipment depreciation. They're paid whether you sell zero or 10,000 units. Variable costs scale with each sale: raw materials, packaging, payment processing fees, shipping. Some costs are 'semi-variable' (utilities go up with usage but have a base charge) - approximate them as fixed for break-even purposes.

Misclassifying costs is the most common break-even mistake. If you treat an overtime wage as fixed, you understate variable costs and overstate margin. If you treat marketing as variable when it's actually a fixed monthly retainer, you overstate margin per unit. Be honest about which costs scale with sales and which are baseline overhead. The [Profit Margin Calculator](/profit-margin-calculator) helps with the underlying margin math.

Coffee shop scenario. Fixed monthly costs: £4,500 rent, £3,000 manager salary, £500 utilities, £200 insurance, £300 software/POS = £8,500/month. Variable cost per coffee: £0.70 (beans, milk, cup, lid, sleeve). Sale price: £4. Contribution margin: £3.30. Break-even: 8,500 ÷ 3.30 = 2,576 coffees per month, about 86/day or 11/hour during 8 working hours.

Sanity check: is 86 coffees/day achievable for the location and demographic? If footfall and conversion suggest 50/day, the business won't break even at this price. Options: raise prices (4 → 5 = 4,000 needed at break-even, but reduces 100 customers/day to 80 - similar revenue), reduce fixed costs (smaller space?), or expand product mix (sell £8 lunch alongside £4 coffee). Break-even tells you the size of the gap between revenue and viability.

Break-even assumes constant costs and prices. Real businesses have: bulk discounts on inputs (variable cost drops at higher volume), price elasticity (demand falls if prices rise), seasonal demand, competition responses, and economies of scale. Static break-even is a useful start but must be revisited regularly as conditions change.

For service businesses, 'units' might be billable hours rather than products. For SaaS, monthly recurring revenue (MRR) replaces one-time unit sales. The framework is identical: fixed costs ÷ contribution per unit/hour/customer = break-even count. Use the [Markup Calculator](/markup-calculator) and [Profit Margin Calculator](/profit-margin-calculator) to set the unit economics that feed break-even.