Solo Biz Soft Editorial Team Your break-even point is the level of sales where you stop losing money and start making a profit. Knowing it helps you set prices, plan a launch and decide whether an idea is worth pursuing.
The formula
Break-even sales = fixed costs ÷ (price per sale − variable cost per sale). The bottom part is called the contribution margin.
Step by step
- Add up your fixed costs for the period.
- Work out the variable cost of each sale.
- Subtract the variable cost from the price to get the contribution per sale.
- Divide fixed costs by the contribution per sale.
- Round up to a whole number of sales.
Worked example
Fixed costs are 5,000. Price is 50 and variable cost is 20, so each sale contributes 30. Break-even is 5,000 ÷ 30 = 166.7, so 167 sales, or 8,350 in revenue.
Common mistakes
- Leaving out fixed costs such as software and insurance
- Ignoring your own time
- Using a price that is lower than the variable cost
Skip the maths: use our free break-even calculator. Check margins with the profit margin calculator.
Frequently asked questions
What is a fixed cost?
A cost that stays the same however much you sell, such as rent.
What is a variable cost?
A cost that changes with each sale, such as materials or payment fees.
How can I lower my break-even point?
Raise prices, cut fixed costs or lower the variable cost of each sale.
More free tools: browse all our free calculators.
This article is general information and not financial advice.