Break-Even Calculator
Find the number of jobs or units you need each month to cover your fixed costs, the revenue that takes, how safe your expected sales are and what volume pays you a target profit. Includes a chart and the formulas.
Break-even chart
Revenue (solid blue) starts at zero and rises with every sale. Total cost (dashed navy) starts at your fixed costs and rises more slowly. Where they cross is the break-even point; to the right of it you are in profit. The results panel above gives the same numbers in text.
How to use this tool
- Enter your costsAdd up fixed costs for one month, then the price and direct cost of one typical sale.
- Add an expected volumeOptionally enter how many sales you expect and the profit you want to see the margin of safety and target volume.
- Test changesTry a higher price or lower variable cost and watch the break-even point move on the chart.
How we calculate it
- Contribution margin per unit = price − variable cost
- Contribution margin ratio = contribution margin ÷ price
- Break-even units = fixed costs ÷ contribution margin (rounded up to whole units)
- Break-even revenue = fixed costs ÷ contribution margin ratio
- Margin of safety = (expected units − break-even units) ÷ expected units
- Units for a target profit = (fixed costs + target profit) ÷ contribution margin
With the example numbers: contribution margin = $150.00 − $60.00 = $90.00. Break-even = $4,000 ÷ $90.00 = 44.4, so 45 jobs, or $6,667 of revenue. At 60 jobs the margin of safety is 25.9%. A $3,000 monthly profit needs ($4,000 + $3,000) ÷ $90.00 = 77.8, so 78 jobs.
Fixed costs, variable costs and the contribution margin
The idea behind break-even is that each sale does two things: it pays for its own direct costs, and whatever is left over chips away at the fixed costs. That leftover is the contribution margin. Until the chipping adds up to your full fixed costs for the month, you are losing money; after that, each extra sale is mostly profit.
This is why the contribution margin matters more than the price. Two jobs at $150 are not the same if one leaves $90 after direct costs and the other leaves $40.
Worked examples
1. Which lever moves break-even most?
Start from the defaults: 44.4 jobs to break even. Raising the price by $10 to $160 lifts the contribution margin to $100.00 and drops break-even to 40 jobs. Cutting the variable cost by the same $10 gives the same result (40 jobs), which is the point: a dollar of price and a dollar of saved direct cost are worth the same to the break-even point. Dropping the price by $15 to $135 does the opposite: contribution margin falls to $75.00 and break-even rises to 53.3 jobs, 8.9 more jobs just to stand still.
2. A product business
A seller of handmade candles pays $2,400 a month for studio rent, insurance and software. Each candle sells for $24 and costs $9 in wax, jar, label and shipping supplies. Contribution margin is $15, so break-even is $2,400 ÷ $15 = 160 candles a month, or $3,840 of sales. If the studio can only make 120 candles a month, the business can never break even at this price and cost, however well it sells. If it can make 400, it has plenty of room above the break-even point.
Common mistakes and pitfalls
- Forgetting your own pay. A break-even that excludes an owner's draw tells you when the business covers its bills, not when it supports you.
- Calling a variable cost fixed (or the reverse). Labor is the usual culprit. Hourly crew time on a job is variable; a salaried office manager is fixed.
- Using list price instead of the price you collect. Discounts, refunds and unpaid invoices lower the real price per job, and with it the contribution margin.
- Mixing periods. Monthly fixed costs need monthly volume. If rent is billed annually, divide it by 12 first.
- Assuming costs stay linear. Fixed costs step up when you add a truck or a hire, and variable costs can fall with volume discounts. Re-run the calculator at the new level rather than extrapolating.
- Ignoring capacity. A break-even point above the jobs you can physically do in a month means the model does not work as it stands.
- Blending very different jobs. The calculator uses one average price and cost. If you sell a cheap and a premium service, use the average mix you actually sell, and update it when the mix changes.
- Treating break-even as cash. It is about profit, not timing. Paying suppliers before customers pay you can strain cash even when you are above break-even.