Plainhub
Free tool

Break-even calculator

How many units you need to sell each month before the company earns anything, the revenue that implies, and how far sales can fall before you are under water. Nothing stored.

Costs
Sales
Break-even units
320
per month
Break-even revenue
€38,400
per month
Contribution margin
€75
63% of price
Monthly profit
€6,000
20% safety margin

Sales could fall 20 percent before you hit break-even. That gap is your margin of safety, and it is the number worth watching monthly, because it moves every time you add a fixed cost.

The break-even formula

Break-even is the volume at which contribution margin finally covers fixed costs:

contribution margin  = price - variable cost per unit
break-even units     = fixed costs / contribution margin
break-even revenue   = break-even units x price
margin of safety     = (current units - break-even units) / current units

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. Raising the price a little moves it more than cutting variable cost a lot, because the price sits on the gross side of the subtraction. If you are close to break-even, a price rise usually beats a cost-cutting round, and it works immediately.

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 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

Every hire and every new tool raises the bar, and a number you worked out in a spreadsheet in March stopped being true in April. Plainhub keeps fixed costs, revenue and runway live: type what happened and the whole picture moves with it.

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