Break-Even Analysis — Formula, Calculator & Examples for Any Business

Before launching any product or business, you need to know: “How many units do I need to sell to cover all my costs?” That’s your break-even point.

The break-even formula

Break-Even Units = Fixed Costs ÷ (Selling Price − Variable Cost per Unit)
Break-Even Revenue = Fixed Costs ÷ Contribution Margin Ratio
Contribution Margin = Selling Price − Variable Cost per Unit

Worked example

A small bakery:

• Fixed costs: ₹50,000/month (rent, salary, utilities)
• Selling price per cake: ₹500
• Variable cost per cake: ₹200 (ingredients, packaging)
• Contribution margin: ₹500 − ₹200 = ₹300

Break-Even = ₹50,000 ÷ ₹300 = 167 cakes/month

They need to sell 167 cakes per month just to cover costs. Anything above that is profit.

Why break-even matters

1. Pricing decisions — Know the minimum price that makes sense
2. Investment justification — Show investors when you’ll become profitable
3. Goal setting — Daily/weekly sales targets become clear
4. Risk assessment — Higher fixed costs = higher break-even = more risk

Reducing your break-even point

• Lower fixed costs — Negotiate rent, go remote, share resources
• Increase selling price — If market allows, even small increases compound
• Reduce variable costs — Bulk purchasing, better suppliers, process efficiency
• Increase volume — Economies of scale reduce per-unit costs

Calculate your break-even with our Break-Even Calculator — see exactly how many units and how much revenue you need.