About

Knowing your Break-Even Point (BEP) is the dividing line between survival and failure for a startup. It defines the precise number of units you must sell to cover all production expenses and operating overheads. Selling one unit less means a loss; selling one unit more means profit. This analysis is crucial for setting sales targets, validating business models, and securing investor funding.

This tool separates Fixed Costs (rent, insurance, salaries) from Variable Costs (materials, shipping, commissions). It calculates the "Contribution Margin" per unit and projects the crossover point where Total Revenue eclipses Total Costs. The integrated chart visualizes your path to profitability, allowing you to instantly see the impact of reducing overhead or increasing prices.

Formulas

The core logic relies on the Contribution Margin approach. The Break-Even Point is reached when the total contribution margin equals total fixed costs.

1. Contribution Margin Unit (CM):

CM = Price − VariableCost

2. Break-Even (Units):

BEP_units = FixedCostsCM

3. Break-Even (Revenue):

BEP_$ = BEP_units × Price

Reference Data

Component	Role in Calculation	Example Items
Fixed Costs (FC)	Expenses that remain constant regardless of sales volume.	Rent, Salaries, Software Subs, Insurance
Variable Costs (VC)	Expenses that increase directly with every unit sold.	Raw Materials, Packaging, Shipping, Stripe Fees
Price (P)	Revenue generated per single unit sold.	Retail Price, Subscription Fee
Contribution Margin (CM)	The amount from each sale that pays down Fixed Costs.	P − VC
Break-Even Point	The volume where Net Income is zero.	FC ÷ CM

Frequently Asked Questions

This calculator assumes a linear relationship for simplicity. If you have tiered pricing or bulk discounts (economies of scale), calculate the weighted average variable cost per unit for a more accurate estimate.

No. This tool calculates Operational Break-Even, which is pre-tax. To calculate a Net Income break-even, you would need to factor in your effective tax rate as an additional cost layer.

The Margin of Safety is how much sales can drop before you reach the break-even point. A healthy business typically aims for sales at least 20-30% above the break-even point to buffer against market volatility.

If your Variable Cost is higher than your Price, you lose money on every sale. The math will return a negative number, indicating that you will never break even regardless of volume. You must raise prices or cut variable costs.