✓ Updated for 2026 — latest methods & data
Find out exactly how many units you need to sell — and how much revenue you need — before your business starts making a profit.
Three levers: cut fixed costs (renegotiate rent, go remote), raise prices (test 5–10% increases), or reduce variable costs (renegotiate suppliers, automate). In 2026, many small businesses cut break-even 15–30% by moving operations online.
Most service businesses should target break-even within 6–12 months; product businesses 12–24 months. If your calculator shows break-even beyond 24 months, revisit pricing or fixed costs before scaling.
| Contribution margin per unit | — |
| Contribution margin ratio | — |
| Units needed for target profit | — |
Your contribution margin is price minus variable cost per unit. Divide fixed costs by that margin to get break-even units. Sell one unit more than that and you are in profit.
Divide total fixed costs by the contribution margin per unit (selling price minus variable cost per unit).
Multiply break-even units by the selling price per unit — shown automatically above.
The amount each sale contributes toward fixed costs and profit: price per unit minus variable cost per unit.
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It's how far your sales can fall before you start losing money: (actual sales − break-even sales) ÷ actual sales. A 30% margin of safety means revenue could drop by nearly a third and you'd still avoid losses — a useful cushion to track monthly.
It should — unpaid founder labor hides the true break-even point. Add a realistic salary for yourself to fixed costs before calculating; otherwise the math flatters the business and you'll wonder why you're 'profitable' but broke.
Use a weighted-average contribution margin: multiply each product's margin by its share of total sales, add them up, then divide fixed costs by that average. Shifting the sales mix toward your higher-margin product pulls the blended break-even point down.
The break-even point is the sales volume where total revenue exactly covers total costs — sell one unit less and you lose money; one unit more and every additional sale contributes pure profit. It's the first number any new business should know, because it turns vague hopes into a concrete monthly target.
The formula: break-even units = fixed costs ÷ (price per unit − variable cost per unit). The denominator is the contribution margin — what each sale contributes toward fixed costs and profit after its own variable cost is paid. Multiply break-even units by price to get break-even revenue.
Worked example: fixed costs of $5,000/month (rent, salaries, subscriptions), a $25 selling price, and $10 variable cost per unit (materials, packaging, fees). Contribution margin = 25 − 10 = $15. Break-even = 5000 ÷ 15 = 333.3 → 334 units; break-even revenue = 334 × 25 = $8,350/month. Sell 400 units and profit = (400 − 334) × $15 ≈ $1,000 — every unit past 334 drops $15 straight to the bottom line.
Practical tips: lower your break-even by cutting fixed costs, raising prices, or trimming variable costs — a $2 variable-cost saving has the same effect as selling many more units. Watch your margin of safety (actual sales − break-even) ÷ actual sales: it tells you how far sales can fall before losses begin. Limitation: the formula assumes constant prices and costs, but volume discounts, price cuts, and step-fixed costs (hiring another employee) all shift the real break-even.
Beyond break-even: margin of safety and operating leverage: once you know the break-even point, the margin of safety tells you how much cushion you have: (actual sales − break-even sales) ÷ actual sales. Selling 500 units against a 334-unit break-even = (500−334) ÷ 500 = 33% margin of safety — sales could fall by a third before losses start. This pairs with operating leverage: businesses with high fixed costs and low variable costs (software, digital products) have terrifying break-evens but explosive profits past them — each sale beyond break-even is nearly pure margin. Low-fixed-cost businesses (services, freelancing) break even fast but scale linearly. That's why a SaaS startup obsesses over reaching break-even while a consultant barely thinks about it — the same formula, opposite strategic implications. Recompute quarterly: rent rises, ad costs creep, and suppliers reprice, silently moving your break-even upward.
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