Your break-even point is the level of sales at which revenue covers every cost and nothing is left over. This calculator works it out in units and in sales value, includes your monthly loan repayments as a fixed commitment, and shows how far sales could fall before you stop covering them.
Estimates only. Lenders use their own methods, rates and fees. Results update as you type; nothing you enter leaves your browser.
Break-even formula
- Contribution per unit = selling price − variable cost per unit
- Break-even units = fixed costs ÷ contribution per unit
- Break-even sales value = break-even units × selling price
- Margin of safety = (current sales − break-even sales) ÷ current sales
Accounting break-even normally counts interest as a fixed cost but not principal repayments. We include the full loan repayment because that is what a lender cares about: whether sales cover the cash you must pay out each month.
Worked example
A small bakery has $30,000 of monthly fixed costs and $5,000 of loan repayments. It sells a product for $50 that costs $30 to make, so each sale contributes $20. Break-even is $35,000 ÷ $20 = 1,750 units a month, or $87,500 of sales. To earn $10,000 of profit it needs 2,250 units. At current sales of 2,500 units, the margin of safety is 30%.
Why lenders care about break-even
When you apply for a loan, the bank adds the new repayments to your fixed costs and asks whether your break-even point is still comfortably below expected sales. A thin margin of safety means a small drop in sales could leave the loan unpaid. Businesses with high fixed costs and low contribution margins are usually asked for stronger security or a lower loan amount. Test the effect on your cash flow cover with the DSCR calculator.
Frequently asked questions
What if I sell many products at different prices?
Use your average selling price and average variable cost per unit, or work in sales value using your overall contribution margin: break-even sales = fixed costs ÷ contribution margin %.
Is rent a fixed or variable cost?
Rent is fixed because it does not change with sales volume. Costs that rise with each sale, such as materials, packaging, card fees and sales commission, are variable.
How do I lower my break-even point?
Raise prices, cut variable costs per unit, reduce fixed overheads, or restructure debt over a longer term to lower monthly repayments.
See also: cash flow vs. profit.
These figures are estimates for planning. They are not financial advice or an offer of credit. See our disclaimer.