Free Break-Even Calculator for Small Businesses

How to Use This Calculator

Start with your fixed costs—the expenses you're stuck paying whether you sell anything or not. Rent, salaries, insurance. Then add what it costs to make or deliver one unit (materials, labor, shipping). Finally, plug in what you're charging customers.

The calculator shows how many units you've got to sell before you stop losing money. It'll also convert that into a revenue number so you're not constantly counting widgets. Throw in your current sales volume if you want to see how much breathing room you've got.

Use this when you're setting prices, cutting costs, or deciding if a business idea makes sense. Lower numbers mean less risk.

What Is Break-Even Analysis?

The Basics

Your break-even point is dead simple: it's when you stop losing money. Sell below this number? You're in the red. Sell above it? You're profitable. If you don't know this number for your business, you're flying blind—and that's how most small businesses fail.

The formula? Fixed Costs divided by (Selling Price minus Variable Cost). Simple math, but using it is what matters.

Why This Number Matters

Truth is, if you need to sell 1,000 units per month just to break even and you're only moving 500, you're losing money every single day. The cash is going out faster than it's coming in. You won't survive long operating like that.

I've watched businesses ignore this number completely. They focus on revenue, celebrate sales milestones, talk about growth—but never stop to ask whether those sales are actually enough to cover their costs. Then six months later they're wondering why the bank account is empty despite "good sales."

The safety margin piece is what really matters once you're past break-even. Selling 2,000 units when you only need 1,000? You've got a 100% buffer. Sales could drop in half and you'd still be making money. That's the position you want to be in, especially with current economic uncertainty making revenue more unpredictable.

Most business advice tells you to focus on growth, scale, expansion. And sure, those matter eventually. But before any of that, you need to know your break-even number and whether you can realistically hit it. Growth is meaningless if you're losing money on every sale or if your fixed costs are so high that you'd need impossible volume just to stay afloat.

Run these numbers before you invest heavily. Many businesses dive in without calculating this and realize too late they can't make it work. By then they've signed a lease, bought equipment, hired people—all the fixed costs that make their break-even point even higher and harder to reach.

The businesses that make it aren't necessarily the ones with the best products or the most funding. They're the ones who understand their numbers and structure their costs so the break-even point is achievable. Everything else is secondary to that basic financial reality.

Fixed vs Variable Costs

Fixed costs don't care about your sales. You're paying $4,850/month for rent whether you sell zero units or 1,000. Same with salaries, insurance, subscriptions, loan payments. These create your biggest financial risk.

Variable costs move with sales volume. Materials at $14.50 per unit, shipping at $3.25 per unit, transaction fees at 2.9% per sale. Make more sales? Higher variable costs. Zero sales? Zero variable costs. Much less risky.

Contribution Margin

What's left after you subtract variable costs from your selling price? That's your contribution margin. If you're selling at $47 with $28.50 variable cost, you've got $18.50 going toward covering fixed costs.

Once fixed costs are covered, every sale after that is pure profit. Higher contribution margin means you need fewer sales to break even.

Margin of Safety

You need a buffer. If your break-even point is 500 units and you're selling 1,000, you've got a 500-unit safety margin (50%). Sales can drop by half before you start losing money.

Under 20% safety margin and one slow month puts you in trouble, whereas over 40% means you can handle some turbulence without too much worry about going into the red.

New Business Reality Check

Calculate this before you launch anything. If you need 2,000 units per month to break even but realistic projections say you'll sell 500, your model doesn't work. Period.

Either cut costs, jack up prices, or pick a different business. Better to learn this now than six months in when you're out of money.

Break-Even Analysis Tips

• Run the numbers before launching
• Recalculate monthly as costs and prices shift, because this isn't a one-time exercise you can just forget about after the initial calculation
• Lower your break-even point = lower risk
• Do you know your daily, weekly, and monthly targets? Makes it way easier to spot problems before they become disasters
• Set sales goals at 150-200% of your break-even for healthy profits, not just survival mode
• Track weekly, not monthly—by the time you see a problem in monthly numbers, it's already compounded and you're playing catch-up
• Test price changes
• Seasonality matters. Your slow months might need completely separate calculations from busy months if the difference is substantial
• Calculate per product line if you sell multiple things
• Negotiate with suppliers and landlords—every dollar you cut drops your target immediately

How to Lower Your Break-Even Point

Cut Fixed Costs

Every dollar you cut from fixed costs drops your break-even point by that same dollar. Move to cheaper space and save $1,850/month? That's about 97 fewer units you need to sell (assuming $18.50 contribution margin).

Renegotiate everything: insurance, utilities, subscriptions. Hire contractors instead of full-timers. Work from home. Sublease unused space. These aren't sexy changes, but they work immediately and permanently.

Raise Prices

Most businesses undercharge. You're selling for $47 with $28.50 variable costs and $9,750 fixed costs? That's 527 units to break even. Bump the price to $52 (just 10.6% more) and you drop to around 415 units—roughly a 22% reduction, give or take.

Small price increases create massive improvements. Test higher prices on new customers first.

Reduce Variable Costs

Negotiate better supplier rates. Buy in bulk for discounts. Improve production efficiency. Find cheaper shipping. Cut waste and defects. Even $2 savings per unit on a $28.50 variable cost boosts your contribution margin by 7%.

Focus on High-Margin Products

If Product A has a 60% contribution margin and Product B has 30%, selling more of A changes everything. In my experience, many businesses sell money-losing products without realizing it. Calculate per product line—you might be shocked at what you find.

Boost Efficiency

Produce more units per hour, reduce setup time, automate repetitive stuff, get better equipment, train people properly—efficiency gains cut variable costs without messing with your prices or fixed expenses, and the impact compounds over time.

Economies of Scale (Eventually)

As volume grows, per-unit costs often drop—bulk discounts kick in, you spread fixed costs over more units—but don't count on this before it actually happens because too many businesses plan based on scale they haven't reached yet.

Understanding Fixed and Variable Costs

Fixed Costs Explained

These expenses don't budge no matter what you sell. Zero units or 10,000 units—you're paying the same amount. Rent, full-time salaries, insurance, loan payments, software subscriptions, property taxes, equipment depreciation. They create risk because you're on the hook even with zero revenue.

Variable Costs Explained

These move with production. More sales = higher variable costs. Zero sales = zero variable costs. Raw materials, per-unit labor (piece-rate or commission), shipping, transaction fees, packaging, sales commissions. Variable costs are less scary—you only pay when you're making money.

Common Fixed Costs

• Rent/Mortgage - $2,850/month, same whether you're open 1 day or 30
• Full-time salaries at $58,750/year, paid regardless of how much you sell
• Insurance costs of $487 monthly (doesn't fluctuate)
• Subscriptions and software. Around $193/month
• Utilities run about $287/month, relatively stable with slight variations
• Equipment Leases: $775 per month on a fixed payment schedule
• If you're doing committed marketing spend rather than performance-based, that's $950/month

Common Variable Costs

• Raw materials at $14.25 per unit, scales directly with volume
• Direct Labor (piece-rate or production-tied): $9.75 per unit
• Shipping runs $2.85 per unit
• Packaging materials. Usually around $1.65 per unit
• Transaction fees are typically 2.9% plus $0.30 per transaction
• Sales commissions - anywhere from 8% to 12% of the sale price depending on your structure

Semi-Variable Costs

Some costs have both fixed and variable pieces. Utilities might be $200 base plus extra when you're running production. Salaries could be $47,500 base plus commission. Labor might be 2 full-time people (fixed) plus temps during busy months (variable).

Split these into their fixed and variable chunks when you calculate. Otherwise your numbers won't make sense.

Why This Distinction Matters

Variable costs are less risky. Sales drop? These costs automatically decrease. Fixed costs? You're paying regardless. High fixed costs mean high break-even point and high risk. Low fixed costs mean low break-even point and low risk—especially important given how costs have shifted lately.

Businesses with mostly variable costs (dropshipping, affiliate marketing) have tiny break-even points. Businesses with high fixed costs (manufacturing facilities, retail stores) need massive sales volumes just to survive—which brings us to how different business types handle this challenge.

Break-Even by Business Type

Different business models have wildly different cost structures:

Product Businesses

Clear per-unit costs make calculations straightforward. Manufacturer: fixed costs include factory, equipment, salaries; variable costs are materials and direct labor. E-commerce: fixed costs are website, marketing, overhead; variable costs are product acquisition and shipping.

Calculate per SKU—some products subsidize others. You might be surprised which ones are actually losing money.

Service Businesses

Variable cost is often just your time. Consultant charging $175/hour with $26/hour labor cost (your time value) and $5,200/month overhead? You've got roughly a $149/hour contribution margin. Need about 35 billable hours per month to break even.

Service businesses typically enjoy low variable costs and high margins—why consulting and freelancing are popular.

Subscription Businesses

Monthly recurring revenue with minimal variable costs. SaaS charging $52/month with $5.20 variable cost (hosting, support) and $84,000/month fixed costs (salaries, servers, marketing)? You'll need somewhere around 1,800 subscribers to break even.

Subscriptions have excellent margins once you hit your number, but getting there takes time.

Restaurants

Food cost is variable (30-35% of menu price typically). Labor is semi-variable (core staff is fixed, extra staff when busy is variable). Rent and utilities are fixed. If you're selling a $31 entree with $10.50 food cost, that gives you about $20.50 contribution margin. With $42,000/month in fixed costs, you'd need roughly 2,050 entrees per month.

Retail Stores

Cost of goods sold is variable (typically 50-60% of retail price). Rent and salaries are fixed. Store buying products for $43, selling for $89, with $21,500/month fixed costs needs to sell around 470 units monthly. Challenge? Inventory ties up cash before you make any sales.

Freelancers and Consultants

Minimal fixed costs (laptop, software, insurance), minimal variable costs (mostly your time). Freelancer with $2,100/month fixed costs charging $110/hour can break even with just 20 billable hours per month. Low break-even point equals low risk—exactly why freelancing took off.

Using Break-Even for Pricing Strategy

Price Too Low

Selling for $38 with $34.50 variable cost and $9,750 fixed costs? Your contribution margin is only $3.50. You need to sell 2,786 units. That's insanely high and incredibly risky.

Raise price to $47 (23.7% increase) and you drop to 527 units—around an 80% drop in required volume. Small price changes create massive impacts when your margins are thin.

Can You Price Too High?

Selling for $195 with $28.50 variable cost gives you great margins, but if customers won't pay it, volume stays too low to reach your break-even point. Better to sell at $78 with lower margin but achievable volume.

Price must balance margin and volume. You need both. No perfect answer here—depends on your market.

Finding Your Sweet Spot

Calculate at different price points—at $38 you need 2,786 units, at $47 you need 527 units, at $57 you need 341 units—and then the question becomes which volume can you actually realistically hit in practice, because if you can sell 1,100 units at $47 but only 250 at $57, then price it at $47 even though the margin looks better at the higher price. Volume matters as much as margin.

Premium Pricing

High price, high margin, low volume. Luxury watch selling for $4,850 with $975 cost gives you roughly a $3,875 contribution margin. You'd need to sell just a handful of pieces to break even—exact number depends on your fixed costs. This works when you're targeting wealthy customers who value exclusivity over price. But it only works if you can actually reach those customers.

Volume Pricing

Low price, low margin, high volume. Think Walmart: 15% margins but absolutely massive volume. Your break-even point requires huge sales—but it's achievable at scale, maybe. Problem? Most small businesses can't actually reach that volume. Don't assume you can just because the math technically works.

Why Cost-Plus Pricing Fails

Adding a fixed markup to variable cost ignores reality. Most pricing guides will tell you to mark up by 50% or 100%, but that's outdated thinking. If your product costs $28.50 and you add 50% to get $42.75, that might not generate enough contribution margin to cover fixed costs. Calculate your break-even point first, then set prices high enough to reach realistic sales volumes at an achievable number.

Understanding Margin of Safety

What It Means

Real talk: this is how much breathing room you have. Selling 1,000 units when your break-even is 600 units? Your margin of safety is 400 units (40%). Sales can drop 40% before you start losing money. Small safety margins mean you're vulnerable to basically anything going wrong.

The Math

Current Sales minus your break-even point equals Safety Margin in units, then divide that by Current Sales and multiply by 100 for the percentage—so 1,000 units sold minus 600 to break even gives you 400 units safety margin, which is 40%.

What's Good Enough?

If you're over 40%, that's excellent. You've got room to absorb problems. Between 30-40% is a solid buffer against downturns. The 20-30% range? Adequate, but keep watching closely. Once you drop to 10-20% you're in concerning territory—you're vulnerable. Under 10% is dangerous. One slow week and you're in the red.

Why It Matters

Economic downturns happen. Competitors launch. Supply chains break. Unexpected expenses hit. Your safety margin protects you from all of it. Selling double your threshold? You can handle a bad month or two. At 105% of threshold? One slow week and you're losing money.

Improving Your Safety Margin—Do This NOW

Two approaches: increase sales volume (more customers, higher per-customer spend) or lower your break-even point (cut costs, raise prices). Both work. But lowering your number is often faster than finding 100 new customers—cutting $1,850/month in fixed costs might take a week of negotiations. Finding enough new customers to cover that? Could take months. Do this now. Seriously. Don't wait until you're already struggling.

Track It Religiously

Check monthly: "We're at 150% of break-even (50% safety margin)." Watch for trends: "We dropped from 50% to 30% safety margin in three months—what's happening with sales or costs?" This is your early warning system.

Frequently Asked Questions