Your break-even point is the number of units you must sell each month before you earn a single rupee of profit. Enter your costs and prices below to find it, and to see how far above it you are.
What break-even tells you
Every business carries fixed costs such as rent, salaries, software and loan payments that arrive whether or not you sell anything. Each sale also has a variable cost, for example materials, packaging or shipping. The difference between your selling price and your variable cost is the contribution per unit, and it is the amount each sale contributes towards covering the fixed costs. Break-even is simply the fixed costs divided by that contribution.
The formulas
- Contribution per unit = selling price – variable cost per unit
- Break-even units = fixed costs / contribution per unit
- Break-even revenue = break-even units x selling price
- Units for a target profit = (fixed costs + target profit) / contribution per unit
- Margin of safety (%) = (expected units – break-even units) / expected units x 100
Worked example
With fixed costs of Rs 150,000 a month, a selling price of Rs 500 and a variable cost of Rs 300, each unit contributes Rs 200. Break-even is 150,000 / 200 = 750 units, or Rs 375,000 in revenue. To earn Rs 50,000 a month you need (150,000 + 50,000) / 200 = 1,000 units. If you expect to sell 1,200 units, your profit is 1,200 x 200 – 150,000 = Rs 90,000 and your margin of safety is 37.5%, meaning sales could fall by more than a third before you start losing money.
Ways to lower your break-even point
You can raise your price, reduce variable cost per unit, or cut fixed costs. Small changes matter: in the example above, a Rs 20 price increase lifts contribution from Rs 200 to Rs 220 and lowers break-even from 750 to about 682 units.
Frequently asked questions
What if my selling price is below my variable cost?
Then each sale loses money and no volume can fix it. The calculator will tell you so. You need to raise the price or cut the variable cost.
Should salaries count as fixed or variable?
Monthly salaries are normally fixed. Sales commissions that scale with revenue are variable.
How often should I recalculate?
Whenever your rent, pricing, supplier costs or team size changes, and at least once a quarter.
This calculator is provided for general information and planning only. It is not accounting, tax, legal or investment advice, and the results depend entirely on the numbers you enter. Please confirm important figures with a qualified professional.