The One Number That Tells a New Business When It Stops Losing Money

Not a profit target — a survival threshold

Break-even point answers a narrower question than "how do I make money?" It answers "at what sales volume do I stop losing money?" Below that number of units, a business loses money overall; above it, every additional sale contributes pure profit, since fixed costs are already fully covered.

Why contribution margin is the key number

Each unit sold contributes its contribution margin — price minus variable cost — toward covering fixed costs. Once enough units have been sold for their combined contribution margins to equal total fixed costs, you've broken even: Break-Even Units = Fixed Costs ÷ Contribution Margin.

Why fixed and variable costs need to be separated correctly

The whole calculation depends on correctly sorting costs into "fixed" (rent, salaries, insurance — the same regardless of sales volume) and "variable" (materials, packaging, per-unit shipping — scaling directly with each sale). Miscategorizing a cost as fixed when it's actually variable (or vice versa) throws off the entire break-even number.

What it doesn't capture

This model assumes price and variable cost per unit stay constant at any volume — real businesses often see costs shift with scale (bulk discounts lowering variable cost, or overtime raising it), which a basic break-even calculation doesn't account for.

Find your number

Our Break-Even Point Calculator calculates break-even units and revenue from your fixed costs, price and variable cost per unit.