Break-Even Calculator
Calculate your break-even point in units or billable hours. See how many sales you need to cover fixed and variable costs.
Every UK business must know its break-even point: the exact number of sales needed to cover all costs. The British Business Bank reports that poor cash-flow planning remains the primary reason 60% of UK SMEs fail within five years. Break-even analysis is the foundation of sound financial planning.
The formula is straightforward. Divide your total fixed costs by the contribution margin per unit (selling price minus variable cost per unit). The result is the minimum sales volume required before your business generates any profit.
This calculator supports both product-based and service-based businesses. For service businesses, break-even is expressed in billable hours rather than units sold. Use the projected volume field to see how many months it will take to reach profitability at your expected sales rate.
How it works
- Select your business model: product (units) or service (billable hours).
- Enter your fixed costs, variable costs, and selling price or hourly rate.
- View your break-even point, contribution margin, and a visual comparison of costs versus revenue at different volumes.
Written by the CalcStack team · Last updated April 2026
Business details
Frequently asked questions
What is a break-even point?▾
The break-even point is the level of sales at which total revenue equals total costs (fixed + variable), resulting in zero profit or loss. It tells you the minimum number of units you must sell (or hours you must bill) to cover all your costs. Any sales beyond this point generate profit.
How is break-even calculated?▾
For product businesses: Break-even units = Fixed costs / (Selling price - Variable cost per unit). The denominator is called the contribution margin. For service businesses: Break-even hours = Monthly overheads / (Hourly rate - Variable cost per hour). If there are no variable costs per hour, it simplifies to overheads divided by hourly rate.
What are fixed costs?▾
Fixed costs are expenses that remain the same regardless of how many units you sell. Common examples include: rent, insurance, salaries (for non-production staff), loan payments, software subscriptions, and accounting fees. These costs must be paid even if you sell nothing. Understanding your fixed costs is essential for accurate break-even analysis.
What are variable costs?▾
Variable costs change in proportion to sales volume. Examples include: raw materials, packaging, shipping, sales commissions, payment processing fees, and direct labour for production. The variable cost per unit should include everything that increases with each additional sale. Accurately tracking variable costs is crucial for pricing and profitability.
What is contribution margin?▾
Contribution margin is the difference between the selling price and the variable cost per unit. It represents how much each sale contributes towards covering fixed costs and generating profit. A higher contribution margin means you reach break-even faster. Contribution margin percentage = (Selling price - Variable cost) / Selling price x 100.
How can I lower my break-even point?▾
You can lower break-even by: (1) reducing fixed costs (negotiate rent, cut unnecessary subscriptions), (2) reducing variable costs per unit (bulk purchasing, more efficient processes), (3) increasing your selling price (if the market allows), or (4) changing your product mix to favour higher-margin items. Most businesses use a combination of these approaches.
How does break-even analysis help with pricing?▾
Break-even analysis shows the minimum price you must charge to cover costs at a given sales volume. If your break-even point requires selling more units than the market can support, you need to raise prices or cut costs. It also helps you evaluate the impact of discounts — a 10% discount might increase the break-even volume by far more than 10%.
What is the difference between break-even for products and services?▾
Product businesses have clear per-unit variable costs (materials, shipping) and calculate break-even in units sold. Service businesses often have minimal variable costs per hour and higher fixed costs (salaries), so break-even is calculated in billable hours or revenue. The concept is identical but the inputs differ.
Should I include my own salary in break-even calculations?▾
Yes, if you want an accurate picture. Include your desired salary (or minimum living expenses) as a fixed cost. Many new businesses make the mistake of excluding the founder's salary, which makes break-even look artificially low. A business that covers all costs except your income is not truly viable long-term.
How often should I recalculate break-even?▾
Recalculate whenever your costs or prices change significantly — at minimum quarterly. Key triggers include: rent reviews, price changes (yours or suppliers), new hires, changes in sales volume, or entering new markets. Many businesses build break-even into their monthly management accounts to track how actual performance compares to the break-even threshold.