What is the break-even formula?

Break-even units = fixed costs ÷ (price per unit − variable cost per unit). The bottom half of that formula is your contribution margin — what each sale contributes toward covering fixed costs.

How do I calculate break-even in revenue instead of units?

Divide fixed costs by your contribution margin ratio (contribution margin ÷ price). $3,000 fixed costs with a 40% contribution margin ratio means $7,500 in revenue to break even.

What counts as a fixed cost?

Anything you pay whether or not you sell: rent, software, insurance, your own salary, loan payments. Variable costs move with each sale: materials, packaging, shipping, payment fees.

Why is my break-even point so high?

Usually thin contribution margin rather than high fixed costs. Raising price by a small amount moves break-even far more than cutting a subscription, because every dollar of price increase is pure contribution.

How to Calculate Break-Even Point (with worked examples)

Break-even is the point where the money coming in finally covers the money going out. Here's the formula, what belongs in each side of it, and how to read the answer.

The formula

Break-even units = fixed costs ÷ (price per unit − variable cost per unit)

The bracket is your contribution margin: the part of each sale that is left over to pay for the things that don't change with volume.

Step 1: separate fixed from variable

Fixed costs are paid whether you sell nothing or a thousand: rent, software subscriptions, insurance, your own draw, loan repayments, accountant fees.

Variable costs arrive with each sale: materials, packaging, shipping, marketplace fees, payment processing, piece-rate labor.

The mistake most people make is putting their own time in the wrong bucket. If you pay yourself a set amount monthly, it's fixed. If you pay per item made, it's variable.

Step 2: work out contribution margin

Say you sell a candle for $40. Materials cost $9, packaging $2, shipping $3, and marketplace fees $2. Variable cost is $16, so contribution margin is $24 per candle — 60% of the price.

Step 3: divide

With $3,000 of monthly fixed costs: $3,000 ÷ $24 = 125 candles a month. That's your break-even point. In revenue terms, 125 × $40 = $5,000.

Break-even in revenue (when you sell many different things)

If you sell dozens of products, unit maths gets messy. Use the ratio instead: break-even revenue = fixed costs ÷ contribution margin ratio. With a blended 55% contribution margin and $3,000 of fixed costs, you need $5,455 in sales a month.

How to read the answer

Break-even far above current sales? Your price is usually the problem, not your costs.
Break-even close to current sales? You're one price rise or one cost cut from profitable.
Break-even below current sales? Every extra sale now contributes straight to profit.

The lever that moves it most

Raising price by 10% on the candle above takes contribution from $24 to $28 and drops break-even from 125 units to 108 — a 14% easier target, from a change most customers won't notice. Cutting $200 of fixed costs only moves it to 117.