Find your profit threshold
💡 Why This Matters Knowing your break-even point is essential for pricing decisions. It tells you exactly how many units you must sell to cover all costs. Everything above that number is profit.
Costs that stay the same no matter how much you sell — rent, salaries, software subscriptions, insurance.
What you charge the customer for one item or one service session.
What it costs you to make or deliver just one unit — materials, packaging, a supply ingredient, a shipping fee. Not rent or salaries.
Not sure if a cost is "fixed" or "variable"? Ask: does it change if I sell one more unit? Rent stays the same either way — that's fixed. One more unit means one more bag of raw materials — that's variable.
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Break-even = Fixed Costs ÷ (Price per Unit - Variable Cost per Unit). This tells you how many units you must sell to cover all costs. Any sales above this point are profit.
Fixed costs stay the same regardless of sales (rent, salaries, insurance). Variable costs change with production (materials, shipping, commissions). Knowing your cost structure is critical.
Set realistic sales targets. If your break-even is 1,000 units/month and you only sell 500, you're losing money. Use this to decide: raise prices, reduce costs, or expect higher volume.
This assumes constant unit price and costs. In reality, prices may change with discounts, costs may drop with bulk orders. Use as a planning guide, not an exact prediction.
Example: Say your fixed costs are $5,000/month, you sell each unit for $25, and it costs $10 to produce one. Your contribution margin is $25 − $10 = $15. Break-even units = $5,000 ÷ $15 = 334 units. Revenue needed to hit that: 334 × $25 = $8,350.
Example: A candle maker has $5,000/month in fixed costs (rent, tools, insurance), sells each candle for $25, and each candle costs $10 in wax, wicks, and packaging to make. Contribution margin = $25 − $10 = $15 per candle. Break-even = $5,000 ÷ $15 = 334 candles/month (about $8,350 in revenue). Sell candle #335 and beyond, and it's profit.
There's no universal number — it depends on your fixed costs and margins. What matters more is whether your realistic monthly sales volume comfortably clears the break-even units. If you're barely reaching it, or falling short, that's a signal to revisit pricing or costs.
Break-even is the point where total revenue equals total costs — zero profit, zero loss. Every unit sold beyond that point contributes directly to profit, since fixed costs are already covered.
No — this calculation covers operating costs only (fixed and variable), not taxes. Taxes are typically applied after profit is calculated, so treat the break-even number as a pre-tax operational target.