Plainhub
Free tool

Break-even point calculator

See how many units you need to sell each month to cover fixed costs. Enter your price and variable cost to calculate contribution margin, break-even revenue and your margin of safety. Add cash to see how long a monthly shortfall would last.

Costs
Sales
Break-even units
320
per month
Break-even revenue
€38,400
per month
Contribution margin
€75
62.5% of price
Monthly loss
€5,250
-28% safety margin

You are 70 units per month short of break-even. Closing that gap takes either volume, a higher price, or lower fixed costs, and fixed costs are usually the fastest of the three to change.

At 250 units you lose €5,250 a month. €90,000 in the bank lasts 17.1 months at that loss, so closing the gap to break-even is worth that many months of runway.

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Break-even point formula

Break-even is the point where contribution margin covers fixed costs. In units, it is fixed costs divided by contribution (price minus variable cost); in revenue, it is fixed costs divided by the contribution ratio. People most often misfile costs: one that arrives whether you sell or not is fixed, and one that grows with each customer is variable.

contribution = price - variable cost
ratio        = contribution / price

break-even units
  = fixed costs / contribution

break-even revenue
  = fixed costs / ratio
  = break-even units x price

margin of safety
  = (units - break-even units) / units

Use the unit form when you sell countable things, and the revenue form when you sell a mix of products or plans and only know an average margin.

Worked example

An invented software company has €24,000 of fixed costs a month, a €120 price and €45 of variable cost per customer (hosting, payment fees, support time). The calculator opens with these numbers.

contribution = 120 - 45 = 75
ratio        = 75 / 120 = 62.5%
units        = 24,000 / 75 = 320
revenue      = 24,000 / 0.625 = 38,400
check        = 320 x 120 = 38,400

selling 250 units a month:
contribution = 250 x 75 = 18,750
result       = 18,750 - 24,000 = -5,250
safety       = (250 - 320) / 250 = -28%

The company is 70 units short. With €90,000 in the bank, a loss of €5,250 a month is 17.1 months of runway. Raise the price to €130 and the contribution margin becomes 85: break-even falls to 283 units (24,000 / 85 = 282.4, rounded up to whole units) and the loss at 250 units shrinks to €2,750, which stretches the same €90,000 to 32.7 months. An 8 percent price rise nearly doubled runway, because the whole increase lands in contribution margin.

The split between fixed and variable is where most people get this wrong. Fixed costs are the ones that arrive whether you sell nothing or everything: rent, salaries, software. Variable costs belong to the unit: hosting for one more customer, payment fees, materials. Put a variable cost in the fixed pile and your break-even point is too high; put a fixed cost in the variable pile and it is too low in a way that flatters you.

Contribution margin is the lever worth attention. A €1 price increase and a €1 variable-cost cut have the same direct effect on contribution per unit, before any change in demand. If you are close to break-even, a price rise can help if demand holds. Compare it with the same euro saving in variable cost and any change in sales volume.

One caveat for subscription businesses: break-even in a month tells you less than whether you are default alive, because recurring revenue compounds while fixed costs mostly do not. Use this to size the gap, then check the trajectory.

Common questions

How do you calculate the break-even point?

Divide fixed costs by the contribution margin per unit, where contribution margin is price minus variable cost. Break-even units = fixed costs / (price - variable cost). Multiply that by the price to get break-even revenue.

What is the break-even point formula?

In units: fixed costs / (price - variable cost per unit). In revenue: fixed costs / contribution margin ratio, where the ratio is (price - variable cost) / price. With €24,000 of fixed costs, a €120 price and €45 of variable cost, that is 320 units or €38,400 of revenue a month.

What is contribution margin?

The money each sale leaves behind after its own variable cost: price minus variable cost per unit. It is what pays for fixed costs, and once fixed costs are covered, it is profit. Expressed as a percentage of price it is the contribution margin ratio.

What is the difference between fixed and variable costs?

Fixed costs stay the same whatever you sell: rent, salaries, software. Variable costs move with each unit: hosting per customer, payment fees, materials. The split matters because only variable costs come out of the price before contribution margin, and only fixed costs sit in the numerator of break-even.

What is a margin of safety?

How far sales can fall before you hit break-even, as a percentage of current volume. At 400 units a month with a break-even of 320, the margin of safety is 20 percent. It is the more useful number month to month, because it moves every time you add a fixed cost.

What if my variable cost is higher than my price?

Then there is no break-even point at any volume. Each sale loses money before fixed costs are considered, so selling more makes the loss bigger. The answer is a higher price or a lower unit cost, never more volume.

Does break-even include my own salary?

It should. If you are paying yourself, that is a fixed cost like any other. Leaving founder salary out produces a break-even point the company can hit while you personally earn nothing, which is a different and much weaker result.

Break-even moves every month. Runway moves with it.

The gap between recurring income and costs determines net burn. Plainhub recalculates that gap and your runway as you record changes to customers, team cost and expenses. Test another monthly cost as a draft to see how much runway it would use before committing to it.

A what-if plan, such as a price rise or a new hire, shows runway before and after so you can see the effect before you commit.

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