Break-Even Analysis

How to Use the Break-Even Analysis Calculator

Break-even is the point where revenue covers every cost and the business stops losing money. Below it, each sale reduces the loss. Above it, each sale is profit. Most owners know their sales number and their expense number, but very few know the exact unit count where the two cross, and that single figure changes how you price, how you staff, and how much you can afford to spend on marketing.

Enter your monthly fixed costs (rent, salaries, software, insurance, anything you pay whether or not you sell), the price you charge per unit, and the variable cost of delivering one unit (materials, shipping, payment processing, contractor hours). The calculator subtracts variable cost from price to get your contribution margin, then divides fixed costs by that margin to find the number of units you need to sell each month just to cover overhead. Slide in your current monthly volume and a target profit, and it shows your margin of safety and how many units it takes to hit the profit you want.

The chart plots revenue against total cost as volume rises. The point where the lines cross is your break-even. A steep revenue line and a flat cost line means each additional sale adds a lot to the bottom line. If the lines run nearly parallel, your contribution margin is thin and the fix is pricing or unit cost, not more volume.

Break-even analysis is one of the first tools we recommend in Predictable Income, because it turns a business from a guess into a system. When you know the number, you can set a sales floor for the month, price new offers with confidence, and decide whether a cost increase is survivable before it hits. Run it every time fixed costs change, and again whenever you adjust pricing.