The Break-Even Formula
Break-Even Point (units) = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit)
The denominator, called the contribution margin, represents how much each sale contributes toward covering your fixed costs after accounting for the direct cost of making that sale.
Fixed vs Variable Costs
Fixed costs stay constant regardless of sales volume — rent, salaries, insurance, and software subscriptions. Variable costs scale with each unit sold — materials, packaging, shipping, and payment processing fees.
Frequently Asked Questions
Break-Even Point (units) = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit). Multiply by price per unit to get break-even revenue.
This varies significantly by industry. Software/digital products often have 70-90%+ margins, while physical retail products might have 30-50%. Higher margins mean fewer units needed to break even.
No — break-even is the point where total revenue equals total costs (zero profit, zero loss). Selling beyond your break-even point is where actual profit begins.