Break-Even Calculator
Explain like I'm 5
Imagine your lemonade stand costs £10 to set up (the table, sign, cups): that is your fixed cost. Each cup of lemonade costs 20p to make: that is your variable cost. You sell each cup for £1. Every cup earns you 80p toward your £10. After 13 cups you have covered your costs. Cup 14 is where you start making actual profit. That is your break-even point.
Break-even results
- Contribution margin per unit–
- Contribution margin %–
- Break-even units–
- Break-even revenue–
Profit target
- Units to hit profit target–
- Revenue to hit profit target–
Volume scenarios
| Volume | Units | Revenue | Variable costs | Profit / Loss |
|---|
Show workings
How to use break-even analysis
Break-even analysis answers one question: how much do I need to sell before this is worth doing? It is useful for new products, pricing decisions, and evaluating whether a business model is viable before committing to fixed costs.
The contribution margin is the key number. Every unit sold contributes that amount toward covering fixed costs, and once fixed costs are covered, toward profit. A high contribution margin means you need to sell fewer units to break even. A low contribution margin means your business model is sensitive to volume: a small drop in sales has an outsized impact on profitability.
Fixed costs vs variable costs
Fixed costs stay the same regardless of how much you sell: rent, full-time salaries, annual software licences, insurance. Variable costs rise and fall with output: materials, packaging, fulfilment, payment processing fees, hourly labour tied to production. Some costs are semi-variable: they have a fixed element and a variable element. Use your best estimate and revisit the numbers as your understanding improves.
The limits of break-even analysis
Break-even analysis assumes a constant selling price and constant variable cost per unit, which may not hold at higher volumes (bulk discounts on materials, or the need to discount to sell more). It also ignores timing: if your fixed costs are monthly but sales are seasonal, the monthly break-even may not reflect your actual cash position. Use it as a starting point, not a full financial model.
Related calculators
Once you know your break-even point, the next step is checking how each sale contributes.
Common questions
What is a break-even point?
The number of units (or amount of revenue) at which your total income exactly covers your total costs, so you make neither a profit nor a loss. Every unit sold above the break-even point generates profit.
What is the formula for break-even point?
Break-even units = Fixed costs ÷ Contribution margin per unit. Contribution margin per unit = Selling price − Variable cost per unit. For example: £10,000 fixed costs, £5 variable cost, £15 selling price → contribution margin = £10 → break-even = 1,000 units.
What counts as a fixed cost vs a variable cost?
Fixed costs do not change with output: rent, salaries, software subscriptions, insurance. Variable costs change directly with each unit: raw materials, packaging, payment processing fees, production labour.
How do I use break-even analysis for pricing?
Try different selling prices in the calculator. A higher price reduces the break-even point but may reduce demand. A lower price may be easier to sell but requires higher volume. The contribution margin percentage tells you how much of each pound of revenue goes toward covering fixed costs and then profit.