Break-Even Calculator

Break-even analysis finds the sales volume where total revenue equals total costs — zero profit and zero loss. Contribution per unit = price minus variable cost per unit. Break-even units = fixed costs ÷ contribution per unit. Fixed costs like rent, salaried payroll, and insurance do not change with volume in the short run. Variable costs like materials, per-order shipping, and marketplace fees as a percent of price scale with each sale. Understanding that split is the foundation of unit economics.

Every unit sold above break-even adds contribution margin straight to profit before tax. If break-even is 444 units and you sell 500, profit before other adjustments is approximately (500 − 444) × contribution per unit — about $1,512 with the default inputs. Price cuts shrink contribution per unit and raise break-even volume disproportionately. A 10% discount on a $45 item may require many more units to recover the same absolute profit dollars.

Contribution margin ratio — contribution divided by price — converts break-even into revenue terms. Break-even revenue = fixed costs ÷ CM ratio. Useful when you think in monthly sales targets rather than unit counts. This calculator shows both units and revenue at break-even so you can compare against your pipeline, ad spend efficiency, and seasonal traffic patterns without converting back and forth manually.

Semi-variable costs blur the clean fixed-versus-variable split. Utilities, part-time labor, and payment processing with both flat and percentage components need judgment — allocate a fixed base plus a variable portion per unit, or use conservative estimates that err toward higher break-even. Startup founders often underestimate fixed costs by omitting founder salary; include a market-rate wage if you plan to pay yourself eventually or the break-even point looks artificially easy.

Break-even is a static snapshot; real businesses face seasonality, returns, bad debt, and inventory shrinkage. If 5% of orders refund, effective contribution drops — increase variable cost per unit by your average return cost or reduce expected sales volume when interpreting results. Wholesale accounts with net-30 terms may delay cash even after you pass break-even on paper, so cash break-even can differ from accounting break-even.

Sensitivity analysis makes break-even more actionable. With defaults ($12,000 fixed, $45 price, $18 variable), contribution is $27 per unit. Raise variable cost to $22 — perhaps from shipping surcharges — and break-even jumps to 600 units. Cut fixed costs 10% to $10,800 and break-even falls to about 400 units. Run a few scenarios before signing a lease or hiring staff based on a single static input set.

Worked example with defaults: $12,000 fixed costs, $45 price, $18 variable cost. Contribution = $27 per unit. Break-even = $12,000 ÷ $27 ≈ 444 units. Revenue at break-even ≈ 444 × $45 = $19,980. Selling 500 units yields about (500 − 444) × $27 = $1,512 profit before tax. Selling only 400 units leaves you roughly $1,188 below break-even — a shortfall of about 44 units times $27 contribution.

This is a pre-tax business planning tool — not tax or legal advice. Income tax applies to profit above break-even based on your entity structure and deductions. Fixed asset depreciation, loan interest, and owner draws affect cash differently than this simplified model shows. IRS Publication 334 covers small business tax basics for self-employed operators; consult a qualified accountant for entity-specific planning.