Break-Even Analysis: How to Find Your Break-Even Point in Units and Revenue

TL;DR: Break-even units = Fixed Costs ÷ (Selling Price − Variable Cost). The denominator is your contribution margin — how much each unit sold contributes toward covering fixed costs. Use the break-even calculator to also find your margin of safety and the exact units needed to hit a specific profit target.

Every business has a point where it stops losing money and starts making it. Below that point, every sale brings you closer to zero but does not yet cover the full cost of running the business. Above it, every additional unit sold generates pure profit equal to the contribution margin. Knowing exactly where that point is — in units and in revenue — is one of the most important numbers in business planning.

Fixed costs vs variable costs

The distinction matters because it determines how costs behave as sales volume changes:

Fixed costs do not change with volume: rent, staff salaries, insurance, software subscriptions, loan repayments, website hosting. You pay these whether you sell 0 units or 10,000 units.
Variable costs scale directly with each unit produced or sold: raw materials, packaging, shipping, payment processing fees, sales commissions. They rise and fall with production and revenue.

A business with high fixed costs and low variable costs (e.g. SaaS) has a high break-even point but enormous profit potential past it. A business with low fixed costs and high variable costs (e.g. service businesses) breaks even sooner but grows profit more slowly.

Contribution margin — the key concept

Contribution margin = Selling Price − Variable Cost per Unit. It measures how much each sale "contributes" toward covering fixed costs before generating profit.

Contribution Margin = Selling Price − Variable Cost per Unit
CM% = Contribution Margin ÷ Selling Price × 100

Example: product sells for $35, variable cost is $15
Contribution Margin = $35 − $15 = $20 per unit
CM% = $20 ÷ $35 × 100 = 57.1%

A higher contribution margin means fewer units needed to break even. A lower margin means you need much higher volume to cover fixed costs.

The break-even formula

Break-Even Units = Fixed Costs ÷ Contribution Margin
Break-Even Revenue = Break-Even Units × Selling Price

Example: Fixed Costs = $5,000/month, CM = $20/unit
Break-Even Units   = $5,000 ÷ $20 = 250 units/month
Break-Even Revenue = 250 × $35 = $8,750/month

Real example: SaaS product

Monthly Fixed Costs:     $15,000
  (salaries, servers, tools)
Variable Cost / seat:    $5.00
  (payment processing, support)
Selling Price / seat:    $99/month

Contribution Margin = $99 − $5 = $94/seat
Break-Even Seats    = $15,000 ÷ $94 = 160 seats
Break-Even Revenue  = 160 × $99 = $15,840/month

Actual seats: 250
Margin of Safety = 250 − 160 = 90 seats (36% buffer)
Profit at 250 seats = (250 − 160) × $94 = $8,460/month

Margin of safety

Margin of safety = Expected Sales − Break-Even Sales. It tells you how much your sales can decline before you start losing money.

Margin of Safety (units)  = Actual Units − Break-Even Units
Margin of Safety %        = MoS ÷ Actual Units × 100

Example: actual 250, break-even 160
MoS = 250 − 160 = 90 units
MoS% = 90 ÷ 250 × 100 = 36%

A margin of safety of 36% means revenue would have to drop by more than a third before the business starts losing money. Below 10% is considered risky for most business types.

Units needed to hit a target profit

The break-even formula extends naturally to any profit target — not just zero profit:

Units for Target Profit = (Fixed Costs + Target Profit) ÷ CM

Example: want $5,000/month profit with the SaaS above
Units = ($15,000 + $5,000) ÷ $94 = 213 seats

Enter a target profit in the break-even calculator and the result appears as a highlighted row alongside the standard break-even — and as a green reference line on the chart.

Frequently asked questions

What is a good contribution margin? It varies by industry. SaaS: 80–90%. Physical ecommerce: 40–60%. Food & beverage: 60–70% gross, but high fixed costs. Below 20% makes break-even extremely volume-dependent.

Can break-even be negative? If variable cost exceeds selling price, contribution margin is negative — meaning you lose money on every unit sold regardless of fixed costs. No amount of volume fixes this; raise the price or reduce variable costs first.

How does raising price affect break-even? Every $1 increase in selling price increases contribution margin by $1 and reduces break-even units. A 10% price increase on a $35 product drops break-even units by approximately 12–15% for most cost structures.

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