Break-even formula (units) — explained in plain English

“Break-even” means you’ve covered your costs. You’re not losing money anymore — but you’re not making profit yet either. The classic break-even point tells you the minimum number of units you must sell so that your total revenue equals your total costs. It’s one of the fastest sanity checks for a new product, a price change, or a business idea.

• Contribution margin per unit: Price per unit − Variable cost per unit
• Break-even units: Fixed costs ÷ Contribution margin per unit
• Break-even sales (revenue): Break-even units × Price per unit

The secret is the contribution margin. Every unit you sell contributes some amount toward paying off fixed costs (rent, software subscriptions, insurance, salaries that don’t change with volume). Once fixed costs are covered, additional contribution becomes profit.

• Fixed costs stay mostly the same in the short term: rent, website hosting, equipment leases, base salaries, accounting tools, business insurance, and minimum utilities.
• Variable costs scale with each unit sold: materials, packaging, transaction fees, shipping per order, commissions, and per-unit labor.

A common mistake is treating “time” as free. If you personally fulfill orders, edit videos, or consult clients, your time behaves like a variable cost. Even if you don’t pay yourself per unit, it still limits scale — and it’s worth modeling.

Sometimes you don’t want to “just break even.” You want to know how many units you must sell to hit a profit goal. That’s a tiny twist on the same formula:

• Units for target profit: (Fixed costs + Target profit) ÷ Contribution margin per unit

This turns break-even into a goal-setting tool. If the result feels unrealistically high, it’s a signal to adjust pricing, costs, or the product offering before you invest months of work.

• Lower break-even units usually means an easier path to viability (less volume needed).
• Higher break-even units can still be fine — but you’ll need strong demand, marketing, or a high-traffic channel to reach the required volume.
• Tight contribution margin (price close to variable cost) is the danger zone: small cost increases can push break-even way up.

If you’re comparing scenarios, don’t obsess over a single “perfect” number. Use the calculator like a dashboard: run a baseline, then test a price change, a supplier change, or a marketing cost increase and see how sensitive your break-even point is.

Break-even examples you can copy (small business + side hustles)

Examples make break-even “click” because you can see the moving parts. Below are three realistic scenarios. You can plug these numbers into the calculator above and verify the results.

Suppose you make candles. Your fixed costs for the month are $1,200 (rent, Shopify, insurance). Each candle sells for $24. Your variable cost is $9 per candle (wax, jar, label, packaging).

• Contribution margin = $24 − $9 = $15
• Break-even units = $1,200 ÷ $15 = 80 candles
• Break-even sales = 80 × $24 = $1,920

Translation: if you sell 80 candles in a month, you cover costs. The 81st candle starts generating profit (assuming no other costs change).

You sell a Notion template for $19. Your variable cost per sale is small but real: payment processing (say $1.20 average), and customer support time valued at $0.80 per sale. So variable cost ≈ $2.00. Fixed costs are $600/month (tools, ads subscription, email platform, a portion of your time).

• Contribution margin = $19 − $2 = $17
• Break-even units = $600 ÷ $17 = 35.3 → 36 sales
• Break-even sales = 36 × $19 = $684

Notice how strong margins make the break-even point small. Digital products often win here because variable costs stay low, but don’t ignore support and refunds — those can matter at scale.

You offer a coaching package for $250. Variable cost is $50 per client (platform fees, materials, onboarding time valued at cost). Fixed costs are $1,000/month. You want $3,000 profit this month.

• Contribution margin = $250 − $50 = $200
• Units for target profit = ($1,000 + $3,000) ÷ $200 = 20 clients
• Revenue at that point = 20 × $250 = $5,000

This is why break-even is useful for planning: it turns “I want $3k profit” into a measurable sales target. If 20 clients feels unrealistic, you can increase price, reduce cost, bundle offers, or shift to group coaching.

• If price ≤ variable cost, the contribution margin is zero or negative — you can’t break even. You must raise price, cut variable cost, or change the business model.
• If fixed costs are high, break-even units rises. Ask: “Can I lower fixed costs early (MVP stage)?”
• Break-even is easiest to improve by increasing contribution margin (price up or variable cost down).

Frequently Asked Questions

• What is the break-even point?

  The break-even point is the sales level where total revenue equals total costs. At break-even you have zero profit (and zero loss). After that point, additional units sold contribute to profit.

• What’s the difference between break-even units and break-even sales?

  Break-even units tells you how many items, subscriptions, or clients you need. Break-even sales converts that to revenue dollars by multiplying units by your price per unit. Both are useful: units help operational planning; sales helps budgeting and cash flow estimates.

• What is contribution margin and why does it matter?

  Contribution margin is price − variable cost. It’s the amount each unit contributes to fixed costs and profit. The bigger your contribution margin, the fewer units you need to sell to break even. If your contribution margin is tiny, your business becomes very sensitive to discounts and cost increases.

• How do I include ad spend or marketing?

  If you spend a fixed amount on ads each month (e.g., $500 regardless of sales), include it in fixed costs. If your marketing cost scales with sales (e.g., affiliate commission per sale), include it in variable cost per unit. Many businesses have a mix, so model the best approximation.

• Should I include taxes?

  For quick planning, many people omit taxes because they depend on jurisdiction and profit. If you want a more conservative estimate, treat taxes and compliance fees as part of fixed costs, or adjust your “target profit” upward to account for them.

• Why does the calculator round up break-even units?

  In real life you can’t sell 35.3 units. If break-even is 35.3, you must sell at least 36 units to fully cover costs. The calculator shows both the exact number and the practical rounded-up target.

• Does break-even guarantee my business will succeed?

  No — it’s a planning metric. You still need demand, distribution, and a competitive offer. But break-even is a fast filter: if the required volume is far beyond what your market or channel can support, it’s better to know early and adjust.

• Can I use this for services, subscriptions, or SaaS?

  Yes. A “unit” can be a client, a subscription, or an average customer in a period. For subscriptions, you can model using monthly price and monthly variable cost, and treat fixed costs as the monthly operating baseline.

• What if my price changes (discounts, tiers, bundles)?

  Break-even assumes a consistent average price. If you have multiple tiers, use a weighted average price per unit, or run separate scenarios (e.g., “mostly discounts” vs “mostly full price”) and compare the break-even points.

Explore more tools

Helpful calculators you can use alongside break-even analysis: