Find out how many units you need to sell — and how much revenue — to cover your costs
💡 Why This Matters Before you can turn a profit, you need to cover your costs. Break-even analysis tells you the exact sales volume where you stop losing money and start making it — essential for pricing and planning.
Break-even analysis is often confused with payback period — but they answer different questions. Break-even is about sales volume, while payback period is about how long it takes to recover an investment over time.
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Start with your profit per unit: revenue per unit minus cost per unit. Divide your fixed costs by that per-unit profit to get the number of units you need to sell to break even. Multiply that by your revenue per unit to get the break-even revenue figure — the total sales dollars needed to cover all your costs.
The units figure tells you exactly how many sales it takes before you stop losing money on fixed costs and start generating real profit. The revenue figure is the same idea in dollar terms — useful for setting sales targets or deciding if a price point is even viable given your fixed overhead.
This calculation assumes your cost and revenue per unit stay constant regardless of volume — in reality, bulk discounts, step-function fixed costs, or capacity limits can change the picture. It also doesn't account for the time value of money, so it's a snapshot, not a full financial forecast.
Use your break-even point as a planning baseline — anything sold beyond it starts contributing to real profit. Revisit the calculation whenever your costs, pricing, or fixed overhead change, since even small shifts in per-unit profit can move your break-even point significantly.
Example: You buy a product for $30 and sell it for $45, giving you $15 profit per unit. Your fixed costs (rent, utilities, etc.) are $2,700/month. Units to break even = $2,700 ÷ $15 = 180 units. Revenue to break even = 180 × $45 = $8,100.
Units to break even = fixed costs / (revenue per unit − cost per unit). Multiply that by revenue per unit to get the break-even revenue figure.
Fixed costs are expenses that don't change with how much you sell — things like rent, salaries, insurance, and loan payments. They're the opposite of variable costs like materials or per-unit shipping, which scale with volume.
No — break-even analysis finds the sales volume needed to cover costs, while payback period measures how long it takes to recover an initial investment over time. They're related but answer different questions.