Break-even Calculator
Find the number of units you must sell to cover your fixed and variable costs.
The break-even calculator tells you how many units you must sell before your business starts making a profit. At the break-even point, total revenue exactly covers both fixed and variable costs. Selling beyond it, every extra unit adds profit equal to its contribution margin.
How to use the calculator
- Enter your fixed costs for the period.
- Enter the selling price per unit.
- Enter the variable cost per unit — materials, packaging, delivery.
- See the units and revenue needed to break even.
How it is calculated
Break-even units = Fixed costs ÷ Contribution per unit
Break-even revenue = Break-even units × Price
Worked example
₹1,00,000 fixed costs, ₹500 price, ₹300 variable cost
Contribution = ₹200 per unit
Break-even = 500 units, or ₹2,50,000 of sales.
Who should use this break-even calculator
- Anyone launching a product or a shop and wanting to know how many units must sell before the business stops losing money.
- Cafe, restaurant and retail owners testing whether a price leaves enough contribution to cover rent and staff.
- Freelancers and makers deciding whether a side project is worth the fixed costs it needs.
- Existing businesses checking how much sales volume a rent increase or a price cut would require.
Common mistakes to avoid
- Leaving the owner salary out of fixed costs. If the business has to pay you, that is a fixed cost. Leaving it out produces a break-even point that looks achievable and is not.
- Using an average variable cost. Variable cost is the cost of making the next unit — materials, packaging, delivery. Apportioned rent belongs in fixed costs, not here.
- Ignoring step changes in fixed costs. Break-even is not linear forever. Renting a second unit, hiring another person or buying a machine moves the whole curve up.
- Counting GST as revenue. Tax collected on a sale is not yours, so break-even revenue should be calculated on the pre-tax price.
- Assuming demand holds at the break-even price. The calculation tells you the volume you need. Whether buyers want that many at that price is a market question the arithmetic cannot answer.
Contribution margin is the real engine
With ₹1,00,000 of fixed costs, a ₹500 selling price and ₹300 of variable cost, each unit contributes ₹200 towards fixed costs. Dividing 1,00,000 by 200 gives 500 units — that is the break-even point, equivalent to ₹2,50,000 of sales.
What matters after that is the contribution each extra sale brings in. Unit 501 contributes the full ₹200 to profit, because the fixed costs are already covered. This is why a business that is barely breaking even can become profitable quickly with a modest rise in volume, and also why a small price cut can be dangerous: cutting the price to ₹450 reduces contribution to ₹150, which pushes break-even up to 667 units — a third more sales simply to stay in the same place.
Break-even terms explained
- Fixed costs
- Expenses that do not change with output — rent, salaries, insurance, subscriptions.
- Variable cost
- The cost of producing one more unit: raw materials, packaging, delivery, payment fees.
- Contribution margin
- Price minus variable cost. The amount each unit contributes towards fixed costs and then profit.
- Break-even point
- The sales volume or revenue at which total revenue equals total costs, leaving no profit and no loss.
- Margin of safety
- How far actual sales sit above break-even. The wider the gap, the more resilient the business is to a slow month.
Using break-even to test a decision
The calculation becomes genuinely useful when you change one input and see what has to happen elsewhere. If rent rises by ₹20,000 a month, fixed costs go from ₹1,00,000 to ₹1,20,000 and break-even moves from 500 to 600 units with a ₹200 contribution — a 20% increase in sales just to stand still. A price cut works in the opposite direction: reducing the price by ₹50 lowers contribution to ₹150 and pushes break-even to 667 units.
Run both scenarios before making the change, and check whether the extra volume is realistic. If the business is already near capacity, or the market is small, the arithmetic may point to a decision the business cannot actually execute.
Frequently asked questions
What does break-even mean?
It is the point where revenue equals total costs, so you make neither profit nor loss. Every unit sold beyond that adds its contribution margin directly to profit.
How can I lower my break-even point?
Raise the selling price, reduce variable costs by sourcing better, or cut fixed costs. Even small improvements in contribution margin can substantially reduce the number of units needed.
Does break-even include taxes?
This calculation covers operating costs. Income tax and interest on business loans are not included; treat the break-even profit as pre-tax and plan for taxes separately.