How do I calculate my break-even point?

Break-even units = Fixed Costs ÷ (Selling Price per Unit − Variable Cost per Unit). The denominator is called the contribution margin. This calculator does the math and shows revenue break-even as well.

What is a good break-even point for a small business?

A healthy break-even point is typically 50–65% of your realistic monthly capacity. If break-even is at 95% of capacity, one slow month means a loss. Design your pricing so you break even at no more than 60% of expected volume.

How long does it take to break even on a small business?

Most small businesses break even within 2–3 years of opening, though this varies widely by industry. Service businesses with low startup costs can break even in months; capital-intensive businesses like restaurants or manufacturing may take 3–5 years. Your monthly break-even analysis tells you whether your current trajectory is on track.

What is the difference between fixed costs and variable costs?

Fixed costs stay the same regardless of how much you sell — rent, insurance, salaries, and loan payments are examples. Variable costs change with each unit produced or sold — materials, packaging, and sales commissions are typical variable costs. Break-even analysis separates these two categories to show the minimum sales volume needed.

How do I use break-even analysis to set prices?

Start with your fixed costs and realistic sales volume. Divide fixed costs by your expected units sold to find the minimum contribution margin you need per unit. Add that to your variable cost per unit to find the floor price. Any price above that generates profit; below it generates a loss at that volume.

Does break-even analysis work for service businesses?

Yes. For service businesses, replace 'units' with billable hours or jobs. Set your selling price as your hourly rate or average job value, and your variable cost as direct labor and materials per job. The break-even formula works the same way and tells you the minimum number of jobs or hours you need each month to cover overhead.

Break-Even Calculator — Find Your Number in 60 Seconds

Q: What is contribution margin?

Contribution margin is the amount each unit sold contributes toward covering fixed costs, calculated as selling price minus variable cost per unit. After break-even, each unit sold adds this amount directly to profit.

What is break-even point?

The break-even point is the revenue or unit volume at which total income exactly equals total costs, resulting in zero profit or loss. It is calculated by dividing total fixed costs by the contribution margin per unit. Most small service businesses break even between $5,000 and $25,000 in monthly revenue.

Break-even benchmarks by business type

Service businesses typically break even at $6,000–$18,000/month in revenue depending on overhead
Restaurants average break-even at 60–70% of seating capacity utilization
Retail businesses with 40–50% gross margin typically break even at $15,000–$40,000/month in sales
SaaS companies targeting $1M ARR often need 150–300 customers at $3,000–$6,000 ACV to cover fixed costs

Your Numbers

Monthly fixed costs Rent, insurance, salaries — costs that don't change with sales

Selling price per unit / job

Variable cost per unit / job Materials, labor, commissions — costs that scale with each sale

Target monthly profit (optional)

Results

→ Enter your costs and price
to see your break-even point

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Break-even units / jobs

Minimum monthly sales to cover all costs

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Break-even revenue

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Contribution margin

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Margin ratio

At 50% of break-even

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monthly result

At 150% of break-even

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monthly result

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Break-Even Benchmarks

Service businesses typically have contribution margins of 60–80%; product businesses 30–50% (SCORE)
Most small businesses reach break-even revenue within 2–3 years of launch; 18 months is strong
82% of small business failures stem from cash flow problems — knowing your break-even is the first safeguard
HVAC contractors typically need 8–12 jobs per month to break even; restaurants 3,000–5,000 transactions

Common Questions

What is a break-even point? +

The break-even point is the level of sales at which total revenue equals total costs — neither a profit nor a loss. Every unit sold above it generates pure profit equal to your contribution margin per unit.

How do I calculate break-even? +

Break-even units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit). Example: $5,000 fixed costs ÷ ($50 price − $20 variable) = 167 units to break even.

What is contribution margin? +

Contribution margin is what each sale contributes toward covering fixed costs: selling price minus variable cost per unit. After break-even, each unit sold adds this amount directly to profit.

What is a good break-even point? +

Aim to break even at 50–65% of realistic monthly capacity. If break-even is at 95% capacity, one slow month means a loss. Design pricing so you break even well before maximum volume.

How do I lower my break-even point? +

Three levers: (1) Reduce fixed costs — negotiate rent, cut software subscriptions. (2) Reduce variable cost per unit — better supplier terms, less waste. (3) Raise your price — even a 10% price increase dramatically cuts break-even units.

Related Calculators

This calculator is for informational purposes only. Results are estimates based on inputs you provide. Consult a qualified financial professional before making business decisions.

Frequently Asked Questions

The break-even point is the level of sales where revenue exactly covers all costs, fixed and variable, leaving zero profit or loss. Every unit sold above break-even generates pure profit. Knowing your break-even helps you set minimum sales targets, price correctly, and evaluate whether a business model is viable.

Divide fixed costs by contribution margin per unit. Contribution margin = selling price minus variable cost per unit. Example: $10,000 fixed costs, $50 price, $20 variable cost. Contribution margin is $30. Break-even = $10,000 / $30 = 334 units.

Contribution margin is the revenue left after subtracting variable costs. It is the amount each unit contributes toward covering fixed costs and generating profit. Higher contribution margin means you reach break-even faster with fewer sales. Thin contribution margins require high volume to be profitable.

Higher fixed costs raise your break-even point. You need more sales before becoming profitable. Higher variable costs shrink contribution margin, also raising break-even. The fastest path to lowering break-even is reducing fixed overhead or increasing price while holding variable costs steady.

There is no universal number. A good break-even is one you can realistically hit within the first few months of operation. If your break-even requires 80% of your estimated maximum capacity, the model is risky. Most advisors suggest your break-even should be achievable at 50-60% of projected capacity.

Raising your price directly improves contribution margin, which lowers break-even. A 10% price increase can reduce break-even by 20-30% depending on your cost structure. This is why pricing is one of the highest-leverage decisions a business owner can make. It affects every unit sold, not just a cost line item.