Business Break-Even Point Calculator
Rent, salaries, insurance, etc.
What you charge customers
Materials, labor, shipping
Calculation Results:
Units Needed to Break-Even: 0
Break-Even Sales Revenue: $0.00
Contribution Margin: $0.00
Understanding the Break-Even Point (BEP)
The Break-Even Point is a critical financial metric for every entrepreneur and business owner. It represents the exact moment when your total revenue equals your total expenses. At this point, your business is not making a profit, but it is also not incurring a loss. Knowing this number helps you set sales targets and pricing strategies.
How to Use the Break-Even Formula
The formula used in this calculator is:
Break-Even Point (Units) = Total Fixed Costs / (Price per Unit – Variable Cost per Unit)
Key Components Explained
- Fixed Costs: Expenses that remain constant regardless of your sales volume. Examples include rent, monthly software subscriptions, and permanent staff salaries.
- Sales Price Per Unit: The amount of money you receive for every individual item or service sold.
- Variable Costs: Expenses that change in direct proportion to your production or sales. This includes raw materials, packaging, and shipping costs.
- Contribution Margin: This is the difference between your Sales Price and Variable Cost. It is the amount of money "left over" from each sale to pay for your fixed costs.
Break-Even Example
Suppose you run a coffee shop with the following monthly data:
- Fixed Costs: $3,000 (Rent and Utilities)
- Sale Price: $5.00 per cup of coffee
- Variable Cost: $1.50 (Coffee beans, milk, and cup)
Your contribution margin is $3.50 ($5.00 – $1.50). To break even, you must sell 858 cups of coffee ($3,000 / $3.50). Every cup sold after 858 generates a profit of $3.50.