What break-even means for a small business
Your break-even point is the sales volume at which the money each sale leaves behind exactly pays for the costs you carry regardless of sales. Below it, the period ends with an operating loss; above it, every additional sale adds to profit. The calculator answers the question in the form you can act on: how many units (or customer orders, sessions, jobs) you need to sell this month or this year, and how much revenue that represents.
Fixed costs, variable costs and selling fees
Fixed costs stay the same whether you sell ten units or a thousand within the period: rent, salaries, software subscriptions, insurance, accounting. Variable costs are paid once per unit sold: the product itself or its materials, packaging, shipping, a per-job subcontractor. Selling fees are what a marketplace, card processor or platform keeps from each sale, usually a percentage of the price plus a fixed amount per order.
Enter fees only in the fee fields. If your variable cost already includes the payment processor's cut, set the fee fields to 0; otherwise the same cost is subtracted twice and the break-even volume comes out too high. The fee is charged on the selling price you enter, which should be the price before sales tax or VAT that you pass on to the government.
The break-even formulas
| Quantity | Formula |
|---|---|
| Contribution per unit c | price × (1 − fee %) − variable cost − fixed fee per sale |
| Contribution margin ratio | c ÷ price |
| Break-even units (exact) | fixed costs ÷ c |
| Minimum whole units | round the exact units up to the next whole number |
| Break-even revenue (exact) | price × fixed costs ÷ c |
| Units for a target profit | (fixed costs + target profit) ÷ c, rounded up |
| Profit at Q units | Q × c − fixed costs |
Worked example
A small online shop sells one product for 50.00. Each unit costs 30.00 to buy and ship, the marketplace keeps 3% of the price, and the shop's fixed costs are 1,000.00 a month. The fee is 1.50 per unit, so the contribution is 50.00 − 1.50 − 30.00 = 18.50 per unit, or 37.00% of the price.
Break-even is 1,000.00 ÷ 18.50 = 54.0541 units. Nobody sells 0.0541 of a unit, so the shop needs at least 55 units a month. The exact break-even revenue is 50 × 54.0541 = 2,702.70, but the revenue at 55 units is 2,750.00, which leaves a profit of 55 × 18.50 − 1,000.00 = 17.50. To earn a target operating profit of 500.00 the shop must cover 1,500.00: 1,500.00 ÷ 18.50 = 81.08, so 82 units, which produce a modelled profit of 82 × 18.50 − 1,000.00 = 517.00. Rounding up is why the profit is slightly above the target rather than exactly 500.
Why whole units matter
Break-even formulas produce fractions, and many calculators stop there. For a business with low volumes the gap matters: rounding 54.05 down to 54 would leave the month 1.00 short, while 55 covers it. This calculator always rounds the required volume up, labels the exact figure separately, and recalculates revenue and profit at the whole number, so the numbers in the table add up.
Assumptions and limits
- One product or service at one constant price. Discounts, bundles and a mix of products are not modelled.
- Variable cost and fees per unit stay constant at every volume (no bulk discounts or tiered fees).
- Results are operating profit before interest and income tax. Loan repayments and financing costs are outside the model; use the loan payment calculator to estimate them separately and, if you want, add the monthly interest to fixed costs.
- Break-even here covers one period's running costs. Recovering a start-up investment is a different question unless you include that cost in the fixed costs yourself.
- Timing of cash is ignored: the calculation says nothing about when customers pay or when you restock.
If you have not set your price yet, start with the margin and markup calculator, which finds the price for a target contribution margin after fees, then bring that price back here. Selling your time instead of a product? Convert shifts to decimal hours with the hours between times calculator and treat one hour as one unit.
FAQ
What is the difference between margin and contribution margin?
Gross margin only subtracts the product cost from the price. Contribution margin also subtracts every other cost that rises with each sale, such as shipping and selling fees. Break-even depends on contribution, because that is the part of each sale that is actually available to pay fixed costs.
Should I include payment and marketplace fees in the variable cost?
Enter them in one place only. This calculator has separate fields for a percentage fee and a fixed fee per sale, so keep them out of the variable cost. Counting a fee twice understates contribution and overstates the units you need.
Why does the calculator say no sales level breaks even?
When the selling price minus variable costs and fees is zero or negative, each sale adds nothing or loses money. Selling more can never pay for fixed costs, so there is no finite answer. Raise the price, cut the unit cost or find a cheaper sales channel, then recalculate.
Should I use monthly or yearly fixed costs?
Use the period you plan and review sales in. Enter fixed costs and the target profit for that same period; the unit results are then per month or per year. The calculator does not convert between the two, so do not mix a yearly rent with a monthly target.
Can I use this for several products?
Only approximately. With several products, break-even depends on the sales mix. A common shortcut is to enter a weighted average price and variable cost based on your expected mix; the result then holds only if that mix holds.
Educational tool, not accounting or tax advice. It does not include sales tax, VAT, income tax, inventory or financing, and it does not know any platform's fee schedule.