What is the break-even point?
It's the number of sales where your income exactly covers your costs. Below it you're losing money, and every sale above it is profit. It's a simple way to test whether a product, a course launch or new equipment makes sense before you spend.
Fixed and variable costs
Fixed costs stay the same however much you sell: software, rent, a designer's fee, an ad budget you've already committed. Variable costs come with each sale: materials, packaging, shipping you cover, and payment or platform fees.
Keep the period consistent. If your fixed costs are monthly, your break-even point and target are per month too.
The break-even formula
Contribution margin = price − variable cost per unit. Break-even units = fixed costs ÷ contribution margin, rounded up. Break-even revenue = break-even units × price. Units for a target profit = (fixed costs + target profit) ÷ contribution margin.
With $2,000 in fixed costs, a $40 price and a $15 variable cost, each sale contributes $25. You break even at 80 units, or $3,200 in sales, and need 120 units to make $1,000 profit.
How to break even sooner
Price usually moves the number most, because every extra dollar goes straight to the contribution margin.
- Raise the price: $5 more in the example cuts break-even from 80 units to 67.
- Lower the cost per unit with bulk materials or cheaper shipping.
- Cut or delay fixed costs you don't need yet.
- Add bundles or upsells, which raise the margin per order without new fixed costs.
Before a launch or a price change
Break-even is a good check before you build something. If a course costs $1,500 to make and sells for $99 with about $5 in fees per sale, you need 16 sales to cover it. If your audience can't realistically deliver that, cut the costs or rethink the price first.
It also shows what a discount really does. Cutting the example's price from $40 to $30 looks like a 25% change, but it shrinks the contribution margin from $25 to $15, so break-even jumps from 80 units to 134.
Frequently asked questions
How do you calculate the break-even point?
Divide your fixed costs by the contribution margin per unit, which is price minus variable cost. $2,000 ÷ $25 = 80 units.
What is contribution margin?
What each sale leaves after its own costs, to pay for fixed costs and then profit. As a ratio, it's the contribution margin divided by the price.
What if my variable cost is higher than my price?
Then you never break even, because each sale adds to the loss. You need a higher price or a lower cost per unit.
How do I find break-even revenue?
Multiply break-even units by your price, or divide fixed costs by the contribution margin ratio. Both give the same answer, apart from rounding.
Should I count my own pay as a fixed cost?
Yes, if you want break-even to mean the business pays you. Add what you need to take home each month to your fixed costs, or enter it as the target profit.