Break-Even Point Calculator – Find BEP for Your Business

Calculate the break-even point in units and sales revenue with our free online break-even calculator. Enter fixed costs, variable costs, and selling price for instant BEP analysis.

Fixed Costs ($)

Variable Cost per Unit ($)

Selling Price per Unit ($)

Load example:

What Is Break-Even Analysis?

Break-even analysis tells you exactly how much you need to sell before your business starts making money. The break-even point is where your total revenue equals your total costs – you're not losing money, but you're not making any either. It's the threshold between loss and profit.

Every business has two types of costs. Fixed costs stay the same no matter how much you sell – rent, insurance, salaries, equipment payments. Variable costs change with each unit you produce – materials, packaging, shipping. Your selling price minus variable cost gives you the contribution margin, which is what each sale contributes toward covering your fixed costs.

Once you've sold enough units to cover all your fixed costs, you've broken even. Every sale after that is pure profit (well, before taxes). Knowing this number helps you set realistic sales targets and understand whether your pricing makes sense.

The Break-Even Formula

Break-Even Units = Fixed Costs ÷ (Selling Price - Variable Cost)

The denominator (Selling Price - Variable Cost) is called the contribution margin. It represents how much each unit sold contributes toward covering your fixed costs. Once fixed costs are covered, that same contribution margin becomes profit.

Fixed Costs

Expenses that don't change with production volume. You pay these whether you sell one unit or one thousand.

Rent or mortgage payments
Salaries and wages
Insurance premiums
Equipment leases
Software subscriptions

Variable Costs

Costs that vary directly with production. Make one more unit, and these costs go up. Make none, and these costs are zero.

Raw materials
Direct labor (per unit)
Packaging
Shipping per order
Transaction fees

Worked Examples

Example 1: Handmade Candle Business

Sarah makes scented candles at home. Her monthly fixed costs are $5,000 (rent, utilities, equipment). Each candle costs $10 in materials and labor, and she sells them for $25.

Fixed Costs:$5,000

Variable Cost per Candle:$10

Selling Price:$25

Contribution Margin:$25 - $10 = $15 per candle

Break-Even Units:$5,000 ÷ $15 = 333.33 → 334 candles

Break-Even Revenue:334 × $25 = $8,350

Sarah needs to sell 334 candles per month to break even. Every candle after that earns her $15 in profit.

Example 2: Coffee Shop

A coffee shop has monthly fixed costs of $8,000. Each cup of coffee costs $2.50 to make (beans, milk, cup, lid) and sells for $5.50.

Fixed Costs:$8,000

Variable Cost per Cup:$2.50

Selling Price:$5.50

Contribution Margin:$5.50 - $2.50 = $3.00 per cup

Break-Even Units:$8,000 ÷ $3.00 = 2,666.67 → 2,667 cups

Break-Even Revenue:2,667 × $5.50 = $14,668.50

The coffee shop needs to sell 2,667 cups per month, or about 89 cups per day, to break even.

Example 3: Software Product

A software company has development and overhead costs of $50,000 per month. Their software has virtually zero variable cost per license and sells for $99.

Fixed Costs:$50,000

Variable Cost per License:$0 (digital product)

Selling Price:$99

Contribution Margin:$99 - $0 = $99 per license

Break-Even Units:$50,000 ÷ $99 = 505.05 → 506 licenses

Break-Even Revenue:506 × $99 = $50,094

Software has high fixed costs but nearly zero variable costs, making it highly scalable after break-even.

Example 4: Consulting Business

A consultant has monthly fixed costs of $6,000 (office, insurance, marketing). Each consulting day costs about $25 in expenses and bills at $150 per day.

Fixed Costs:$6,000

Variable Cost per Day:$25

Daily Rate:$150

Contribution Margin:$150 - $25 = $125 per day

Break-Even Days:$6,000 ÷ $125 = 48 days

Break-Even Revenue:48 × $150 = $7,200

The consultant needs to bill 48 days per year to cover annual costs, or about 4 days per month.

Quick Fact

Walter Rautenstrauch, an American engineer and professor at Columbia University, is credited with developing break-even analysis in the 1930s. He created it as a tool for business planning during the Great Depression, when companies desperately needed to understand their cost structures and minimum sales requirements. The technique became standard business practice by the 1950s and remains one of the most fundamental tools in managerial accounting today.

Frequently Asked Questions

What if my selling price is less than my variable cost?

You can never break even – you lose money on every single unit sold. No amount of sales volume will help. You must either raise your price above the variable cost or find a way to reduce variable costs. This situation sometimes happens with loss leaders (products sold at a loss to attract customers), but those only work if they drive sales of profitable products.

Does break-even analysis include taxes?

Basic break-even analysis doesn't include income taxes because you're calculating when revenue equals costs (zero profit, zero tax). If you want to know how many units you need to sell to achieve a specific after-tax profit, you'd need to adjust the formula to account for your tax rate.

How often should I recalculate my break-even point?

Recalculate whenever anything significant changes: rent increases, material costs go up, you change your pricing, or you add new fixed expenses. Many businesses review their break-even analysis quarterly as part of regular financial planning. If your costs are stable, an annual review might suffice.

Can break-even analysis handle multiple products?

Yes, but you need to use a weighted average contribution margin based on your expected sales mix. If Product A has a $10 margin and makes up 60% of sales, and Product B has a $20 margin at 40% of sales, your weighted average is ($10 × 0.6) + ($20 × 0.4) = $14. Use this in the break-even formula.

What's the margin of safety?

Margin of safety is how much your actual or expected sales exceed the break-even point. If you break even at 1,000 units and expect to sell 1,500, your margin of safety is 500 units or 33%. It tells you how much sales can drop before you start losing money. A larger margin of safety means less risk.

Why is my break-even point so high?

A high break-even point usually means one of three things: fixed costs are too high, contribution margin is too low (price too close to variable cost), or both. To lower it, you can reduce fixed costs (downsize, negotiate rent), increase prices, or reduce variable costs (find cheaper suppliers, improve efficiency).

Is break-even analysis useful for service businesses?

Absolutely. Service businesses have fixed costs (office, salaries, software) and variable costs (materials, travel, subcontractors). A consultant might calculate break-even in billable days. A salon might calculate it in appointments. The math is the same – you just define your "unit" appropriately for your business.

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