Use our free Break-Even Calculator to work out how many units you need to sell before your business starts making a profit. Enter your fixed costs, selling price and variable cost per unit to calculate your break-even point, break-even revenue and contribution per unit.

How does the Break-Even Calculator work?

To use the calculator, you need to enter three figures:

Fixed Costs
These are the costs your business pays regardless of how many products or services you sell.

Examples might include:

Rent

• Insurance
• Salaries
• Software subscriptions
• Website costs
• Equipment costs
• Accountancy fees

For example, if your monthly fixed costs are £2,000, you would enter £2,000.

Selling Price per Unit
This is the amount you charge for each product, item or unit that you sell.

For example, if you sell a product for £50, enter £50.

Variable Cost per Unit
This is the cost directly associated with producing, purchasing or delivering each individual unit.

Examples might include:

• Materials
• Stock
• Packaging
• Delivery costs
• Manufacturing costs
• Sales commission

For example, if each product costs £20 to make or purchase, enter £20.

Once you've entered your figures, click Calculate to see your break-even results.

What is a break-even point?

Your break-even point is the point at which your total income covers your total costs.

At break-even:

Revenue = Total Costs

You haven't made a profit, but you haven't made a loss either.

Once you sell more than your break-even point, the additional sales can begin contributing towards profit.

For example, imagine your business has:

• Fixed costs of £1,000
• A selling price of £10 per unit
• A variable cost of £4 per unit

Each unit sold contributes £6 towards covering your fixed costs.

The calculation is:

£10 selling price − £4 variable cost = £6 contribution per unit

You then divide your fixed costs by that contribution:

£1,000 ÷ £6 = 166.67 units

Because you can't normally sell 0.67 of a unit, you would need to sell 167 units to break even.

What do the results mean?

The calculator gives you several figures to help you understand your break-even point.

Break-Even Point
This is the number of units you need to sell to cover your costs.

Using our example, you would need to sell:

167 units

After reaching this point, additional sales could contribute towards profit.

Break-Even Revenue
This is the amount of revenue generated when you reach your break-even point.

If you need to sell 167 units at £10 each:

167 × £10 = £1,670

Your break-even revenue would therefore be:

£1,670

Contribution per Unit
This tells you how much each sale contributes towards covering your fixed costs.

The formula is:

Selling Price − Variable Cost

Using our example:

£10 − £4 = £6

Every unit sold contributes £6 towards your fixed costs.

Contribution Margin
Contribution margin shows the contribution as a percentage of the selling price.

The formula is:

Contribution per Unit ÷ Selling Price × 100

Using our example:

£6 ÷ £10 × 100 = 60%

This means that 60% of each sale contributes towards covering fixed costs and, once those costs are covered, towards profit.

How can a Break-Even Calculator help your business?

Understanding your break-even point can help when you're making decisions about:

• Pricing your products or services
• Setting sales targets
• Understanding your costs
• Planning a new business
• Launching a new product
• Forecasting potential profitability
• Deciding whether changes in costs or pricing are sustainable

For example, if your break-even point is 500 units per month, but realistically you only expect to sell 200, that gives you something rather important to think about before merrily ploughing ahead.

You could either:

• Increase your selling price
• Reduce your variable costs
• Reduce your fixed costs
• Increase the number of units sold.

Changing any of these figures will affect your break-even point.

Break-even calculations are estimates

A break-even calculation is based on the figures you enter and assumes that those figures remain consistent.

In reality, your costs and selling prices may change, and some businesses have costs that don't fit neatly into either fixed or variable categories.

The calculator should therefore be used as a planning and estimation tool, rather than a guarantee of future profitability.