Break-Even Calculator

The Most Important Number in Business

Every business owner asks the same question: "How much do I need to sell before I actually make money?"

The answer to this question is your Break-Even Point (BEP). It is the magic number where your total revenue equals your total costs. At this exact point, you have made $0 profit, but you have also lost $0. Every single unit you sell after this point is pure profit.

Our Break-Even Calculator takes the guesswork out of your business planning. Whether you are launching a new product, running a dropshipping store, or planning a SaaS startup, knowing your BEP is essential for survival.

Understanding the Formula

To calculate your break-even point, you need to understand three distinct variables. The math is simple, but classifying your costs correctly is where most people make mistakes.

1. Fixed Costs (The Overhead)

These are expenses that stay the same regardless of how much you sell. Whether you sell 1 unit or 1,000 units, you still have to pay these bills.

• Rent for office or warehouse space.
• Employee salaries (for administrative staff).
• Software subscriptions (Shopify, Quickbooks, Zoom).
• Insurance and property taxes.

2. Variable Costs (The Cost of Goods)

These are costs that rise directly with your sales volume. If you sell zero items, your variable costs should be zero.

• Raw materials or inventory cost per item.
• Shipping labels and packaging materials.
• Credit card processing fees (e.g., 2.9% per transaction).
• Sales commissions.

3. Selling Price

This is simply how much you charge the customer for one unit of your product or service.

Real World Example: The Coffee Shop

Let's say you want to open a small coffee stand. Is it a viable business idea?

• Fixed Costs: $2,000 per month (Rent, Equipment Loan).
• Selling Price: $5.00 per latte.
• Variable Cost: $1.00 per latte (Beans, Milk, Cup).

The Calculation:
Each latte generates $4.00 of "Contribution Margin" ($5 price - $1 cost).
You need to cover $2,000 in rent.
$2,000 / $4.00 = 500 Lattes.

You need to sell 500 lattes a month just to break even. If you are open 20 days a month, that's 25 coffees a day. Any sales after cup #25 are your profit.

How to Lower Your Break-Even Point

If you use the calculator and the number seems impossibly high, don't panic. There are only two ways to lower your break-even point to make your business safer.

Option A: Increase Contribution Margin

You can do this by raising your prices (selling for $6 instead of $5) or lowering your variable costs (finding a cheaper supplier for cups). A higher margin means fewer sales are required to cover rent.

Option B: Lower Fixed Costs

This is often the hardest but most effective method. Can you negotiate cheaper rent? Can you run the business from home? Can you replace paid software with free alternatives? Lower overhead drastically reduces the pressure to sell.

Why "Break-Even" is Just the Beginning

Remember, the goal of business is not to break even—it is to make a profit. The Break-Even Point is simply your "safety line." When setting goals for your team, you should always aim significantly higher than this number.

Investors and banks love this metric because it shows you understand your risk. If you can prove exactly how many units you need to sell to survive, you look much more credible than a founder who just guesses.