How to Calculate Your Break-Even Point (With Free Calculator)

September 5, 2026 · 5 min read

Every business owner needs to know their break-even point — the exact moment where revenue covers all costs and profit begins. Below this point, you lose money. Above it, every sale adds to profit. Knowing your number lets you set realistic pricing, forecast profitability, and make informed decisions about new products or services.

The Break-Even Formula

Break-Even Units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). If your fixed costs are $5,000/month, your product sells for $50, and each unit costs $20 to produce, you break even at 5,000 / (50 - 20) = 167 units per month. Sell 168 units and you make a $30 profit. Sell 150 and you lose $510.

Fixed vs Variable Costs

Fixed costs stay the same regardless of sales volume: rent, insurance, salaries, software subscriptions, loan payments. Variable costs change with each sale: materials, shipping, payment processing fees, sales commissions. Correctly categorizing your costs is essential for an accurate break-even calculation.

Break-Even for Service Businesses

For services, the formula becomes: Break-Even Revenue = Fixed Costs / Contribution Margin Ratio. If your fixed costs are $4,000/month and your contribution margin is 60% (meaning 40 cents of every dollar goes to variable costs), you break even at $4,000 / 0.60 = $6,667 in monthly revenue.

Using Break-Even for Decisions

Before launching a new product, calculate the break-even. Can you realistically sell that many units? Before hiring, calculate the new break-even with the added salary cost. Before renting a bigger space, calculate how much additional revenue the higher rent requires. Break-even analysis turns gut decisions into math.

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Our free Percentage Calculator handles this instantly — no signup, no limits.

Also useful: our ROI Calculator for related calculations.