Last updated: May 2026
Find the exact unit volume and revenue where your business stops losing money — and starts making it.
Your Costs & Pricing
Formulas Used
CM = Price per Unit − Variable Cost per Unit
BE Units = Fixed Costs ÷ Contribution Margin
BE Revenue = Fixed Costs ÷ CM Ratio (where CM Ratio = CM ÷ Price)
Profit / Loss at Different Sales Volumes
Price Sensitivity — Break-Even Units
How your break-even unit count shifts at different price points (variable cost & fixed costs held constant).
Example Break-Even Scenarios
Real-world reference points across different business types.
| Business | Fixed / mo | Variable / unit | Price / unit | BE Units | BE Revenue |
|---|---|---|---|---|---|
| Home Bakery | $1,200 | $3.50 | $12.00 | 142 | $1,706 |
| SaaS (monthly sub) | $15,000 | $2.00 | $49.00 | 319 | $15,629 |
| Retail Boutique | $6,500 | $18.00 | $55.00 | 176 | $9,676 |
| Freelance Agency | $4,000 | $250 | $1,500 | 4 | $6,000 |
| Food Truck | $3,800 | $4.00 | $14.00 | 380 | $5,320 |
Contribution Margin (CM) is the amount each unit sale contributes toward covering fixed costs after variable costs are paid. Once total CM equals fixed costs, you've hit break-even.
Fixed costs don't change with volume — rent, salaries, and subscriptions are the same whether you sell 10 or 1,000 units. Variable costs scale directly with output.
Margin of Safety tells you how far your actual sales sit above the break-even point. A 30%+ margin means you'd need a significant revenue drop before hitting losses — a comfortable cushion.
Limitation: This model assumes a single product with a constant price and cost structure. Multi-product businesses should calculate a weighted-average CM ratio across their product mix.
For informational purposes only. Break-even analysis relies on assumptions about costs and sales volume that may not hold in practice. Consult an accountant for business planning decisions.
Break-even analysis answers one of the most fundamental questions in business: how much do I need to sell before I stop losing money? The calculation is straightforward — divide total fixed costs by the contribution margin per unit (price minus variable cost) — but understanding what drives the number is essential for pricing decisions, capacity planning, and evaluating new product lines.
The table below shows real-world break-even examples across common business models. Note how a SaaS app with near-zero variable costs per user reaches profitability at just 444 paying customers, while a restaurant with high per-cover food costs needs over 1,000 meals per month before the lights stay on.
| Business | Fixed Costs/Mo | Variable Cost/Unit | Price/Unit | Break-Even Units |
|---|---|---|---|---|
| Coffee shop | $8,500 | $1.20 | $4.50 | 2,576 drinks |
| SaaS app | $12,000 | $2/user | $29/user | 444 users |
| Freelancer | $3,000 | $0 | $75/hr | 40 hours |
| Restaurant | $15,000 | $8 | $22 | 1,071 covers |
| E-commerce | $4,000 | $18 | $45 | 148 orders |
| Gym | $10,000 | $5/member | $40/member | 286 members |
What is break-even analysis?
Break-even analysis determines the point at which total revenue equals total costs — producing neither profit nor loss. Below break-even, the business runs at a loss. Above it, every additional unit sold generates profit equal to its contribution margin. It is a foundational tool for pricing decisions, launch planning, and evaluating whether a business model is viable at a given scale.
What is the difference between fixed and variable costs?
Fixed costs remain constant regardless of output — rent, salaries, insurance, and software subscriptions do not change whether you sell 10 or 10,000 units. Variable costs scale directly with production or sales — raw materials, payment processing fees, shipping, and sales commissions are typical examples. The break-even formula divides fixed costs by the per-unit contribution margin (price minus variable cost).
What is contribution margin?
Contribution margin (CM) is revenue minus variable costs — the amount each unit "contributes" toward covering fixed costs after paying for the direct cost of producing or delivering it. A product selling for $50 with $18 in variable costs has a CM of $32. Contribution margin ratio (CM ÷ Price) is used for revenue-based break-even analysis when a business sells multiple products at different prices.
How does break-even change with price increases?
Price increases directly improve the contribution margin and lower the break-even point — often dramatically. Raising price from $50 to $55 on a product with $18 variable costs increases CM from $32 to $37 (a 15.6% improvement). If fixed costs are $5,000/month, break-even drops from 157 units to 135 units — 14% fewer sales needed to cover costs. Pricing strategy is one of the highest-leverage levers in break-even management.
What is margin of safety?
Margin of safety measures how far actual or projected sales exceed the break-even point. It is expressed as a percentage: (actual sales − break-even sales) ÷ actual sales. A 30% margin of safety means the business could absorb a 30% drop in revenue before falling into a loss. Businesses with high fixed costs (airlines, manufacturers) tend to have low margins of safety, making them more vulnerable to revenue downturns.