cash-flow
Break-Even Point Calculator for Small Business
Break-even analysis answers the foundational SMB question: how many units do I need to sell each month to cover my fixed costs? This calculator runs your specific numbers — fixed monthly costs, price per unit, variable cost per unit — and outputs the break-even units, the corresponding revenue, and the contribution margin %.
Educational estimate based on the inputs you entered — not financial, legal, or tax advice. Verify against your specific situation before acting on this output.
How it works
Methodology
Inputs
- Fixed monthly costs
- Costs that don't change with volume — rent, salaries, insurance, software, base utilities.
- Price per unit
- Average selling price per unit (or per service hour, per project, etc.).
- Variable cost per unit
- Direct cost per unit sold — materials, payment processing, commission, fulfillment.
Formula
Contribution per unit = Price per unit − Variable cost per unit Break-even units = Fixed monthly costs ÷ Contribution per unit Break-even revenue = Break-even units × Price per unit Contribution margin % = Contribution per unit ÷ Price per unit
Assumptions
- Assumes pricing and unit cost are constant — bulk discounts or volume-based variable costs require running multiple scenarios.
- Service businesses can substitute 'units' with billable hours and use hourly rate/cost.
- Doesn't model semi-variable costs (e.g., shipping that scales partly with volume but has a base fee).
Worked examples
Product business
- Fixed monthly costs
- $18,000
- Price per unit
- $75
- Variable cost per unit
- $30
Contribution per unit: $45. Break-even: 400 units / $30,000 revenue per month. Contribution margin: 60%.
Frequently asked
Questions readers ask
How do I calculate break-even point? +
Break-even units = fixed costs ÷ contribution per unit. Contribution per unit = price − variable cost per unit. Below the break-even units, you're losing money each month. Above it, every additional unit goes to profit.
What's the difference between fixed and variable costs? +
Fixed costs don't change with volume (rent, salaries, insurance, software). Variable costs scale with each unit sold (materials, fulfillment, payment processing, sales commission). The split matters because variable costs are deducted per-unit while fixed costs need a target volume to cover.
Does the break-even point change if fixed costs go up? +
Yes — break-even units move directly with fixed costs. If fixed costs rise (new lease, added headcount, new software), break-even units = fixed costs ÷ contribution per unit rises proportionally. A 10% increase in fixed costs requires 10% more unit volume (or a price/cost adjustment) to hold the same break-even point.
Can I express break-even in revenue dollars instead of units? +
Yes — break-even revenue = fixed costs ÷ contribution margin % (contribution per unit ÷ price per unit). This is useful for businesses that sell multiple products at different prices, where a single 'units' figure doesn't mean much. Revenue-based break-even is the more common framing for service or multi-SKU businesses.
How does break-even analysis work for a service business without physical units? +
Substitute 'units' with billable hours, projects, or clients. Price per unit becomes your hourly rate or project fee; variable cost per unit becomes the direct cost of delivering one hour or project (subcontractor pay, materials, software seat cost). The same formula — fixed costs ÷ contribution per unit — tells you how many billable hours or projects you need before the month turns profitable.
This tool is for educational purposes only and is not financial, legal, or tax advice. Final terms and eligibility depend on lender underwriting; consult a tax professional before acting on tax-tool output. ClearValue Lending is a funding platform.