Break-even Calculator

Enter your fixed costs, your price and what each unit costs to produce. The answer is the volume at which the business stops losing money — and when the numbers mean no volume will ever reach it, the tool says so instead of returning a target.

What this tool does

Break-even splits costs in two. Fixed costs — rent, software, insurance, salaried people — are there whether you sell one unit or a thousand. Variable costs belong to the unit: materials, the subcontractor, the processing fee. What separates price from variable cost is the contribution each sale makes towards the fixed pile.

Contribution, not price, is the number that decides everything. A £50 product carrying £45 of variable cost contributes £5, so covering £3,000 of fixed costs takes 600 sales; at £20 of contribution the same costs take 150. Volume targets set without working out contribution first are guesses, and the usual discovery is that the plan required more customers than the market contains.

How it works

  1. Separate fixed from variable

    Fixed costs do not move with volume across the period you are looking at. Variable costs are incurred per unit sold. The test is simple: anything you would still pay next month having sold nothing at all is fixed.

  2. Contribution is price minus variable cost

    Not profit — contribution. It is what each sale puts towards the fixed costs, before any part of it becomes profit, and it is the denominator everything else depends on.

  3. Break-even is fixed costs divided by contribution

    Rounded up, because partial units do not sell. 47.2 means 48, and the difference matters when the answer is close to the capacity you actually have.

  4. Sometimes there is no answer at all

    When price sits at or below variable cost, each sale contributes nothing or costs you money, and no volume breaks even. The tool reports that rather than dividing anyway and producing a large or negative figure that looks like a target.

Worked example

A studio with £4,500 of monthly fixed costs, selling a service at £750 with £300 of variable cost per job.

Inputs

Fixed costs (monthly)
£4,500.00
Price per unit
£750.00
Variable cost per unit
£300.00

Result

Contribution per unit
£450.00
Contribution margin
60%
Break-even
10 units
Break-even revenue
£7,500.00

Why it matters: Ten jobs a month cover the costs and earn nothing; the eleventh is the first £450 of profit. Cut the price to £600 and contribution falls to £300, pushing break-even to 15 jobs — a 20% discount that demands 50% more work simply to stand still.

Best practices

  • Recalculate whenever a fixed cost changes. A new subscription or a hire moves the break-even point the day it starts, and nothing else in the business announces it.
  • Put processing and delivery in variable costs. They scale with sales, and leaving them out flatters the contribution on every single unit.
  • Work in the period your fixed costs are actually billed in. Monthly costs give a monthly target, which is the only version anyone can manage against.
  • Sanity-check the answer against capacity. A break-even needing more hours than the month contains is not a target — it is a pricing problem wearing a target’s clothes.
  • Test a price rise before a volume push. Contribution moves pound for pound with price, so a modest increase usually shifts break-even further than a large sales effort would.

Common mistakes

Treating salaries as a variable cost

A salaried employee is paid whether or not the unit sells, which makes them fixed. Classifying wages as variable inflates contribution and produces a break-even figure that comfortably fails to cover the payroll it quietly excluded.

Dividing by profit instead of contribution

Profit already has a share of fixed costs deducted from it, so using it as the denominator counts those costs twice and understates the volume required. The denominator is price minus variable cost, and nothing else belongs in it.

Discounting to reach a volume target

A discount cuts contribution directly, so the volume needed climbs faster than the price falls. Twenty percent off a 60% contribution margin means half as much again in sales just to hold the same position.

Mistaking break-even for a goal

It is the point at which the business stops losing money. Planning to break even is planning to work a year for nothing — the useful version adds the profit you actually intend to earn to the fixed costs before dividing.

Frequently asked questions

What is the break-even formula?

Fixed costs divided by contribution per unit, where contribution is price minus variable cost. £4,500 of fixed costs against £450 of contribution gives 10 units. Always round up — a partial unit does not sell and does not pay.

What counts as a fixed cost?

Anything you would still pay having sold nothing this month: rent, insurance, software subscriptions, salaried staff, accountancy. Fixed does not mean permanent — it means it does not move with volume across the period you are measuring.

What if I sell several different things?

Run it per line, or use an average contribution weighted by how much of each you genuinely sell. A single blended figure across items with very different contributions manages to be wrong for every one of them at once.

Why does it say break-even is unreachable?

Because the price is at or below the variable cost, so each sale contributes nothing towards fixed costs and additional volume simply increases the loss. That is a pricing answer rather than a volume one, and no amount of selling fixes it.

Should I include my own salary?

If you draw a regular amount regardless of sales, yes — it is a fixed cost, and leaving it out produces a break-even point at which you personally are unpaid. If you only take money from profit, leave it out and read the answer as before-owner-pay.

How does break-even relate to margin?

Contribution margin is the percentage form of the same figure — contribution divided by price. A higher margin means fewer units to cover the same fixed costs, which is precisely why a price rise moves the break-even point faster than a sales push does.

Turn the answer into an invoice

The result above transfers straight into the invoice generator — dates, amounts and terms already filled in. Free, no account needed.

Open the invoice generator

Sources & further reading

Related

Invoice types

Published · General information, not legal, tax or financial advice.