Your break-even point is where your sales exactly cover all your costs: no profit, no loss. Every unit you sell beyond it adds to your profit. Knowing this number helps you set prices, plan targets and decide whether a new shop, product or hire is worth it.
How to use the break-even calculator
- Enter your fixed costs per month: rent, salaries, electricity, loan EMIs and other costs that don't change with sales.
- Enter the selling price per unit.
- Enter the variable cost per unit: raw material, packing, delivery and commission for each unit sold.
Break-even formulas
Contribution per unit = Selling price − Variable cost
Break-even units = Fixed costs ÷ Contribution per unit
Break-even sales = Fixed costs ÷ (Contribution per unit ÷ Selling price)Example
A small bakery has fixed costs of ₹50,000 a month. It sells cakes at ₹500 each, and each cake costs ₹300 in ingredients and packing.
- Contribution per cake = 500 − 300 = ₹200
- Break-even = 50,000 ÷ 200 = 250 cakes a month
- Break-even sales = ₹1,25,000 a month
- Contribution margin = 200 ÷ 500 = 40%
From the 251st cake onwards, each cake adds ₹200 to profit.
How to reach break-even faster
- Raise the price a little. At ₹550 per cake the contribution becomes ₹250 and break-even drops to 200 cakes.
- Cut variable costs. Buying ingredients in bulk or cheaper packaging raises the contribution per unit.
- Control fixed costs. A smaller space or shared equipment lowers the target directly.
Check your pricing with the profit margin calculator.
FAQ
What is a break-even point?
It is the sales level at which total income equals total costs. Below it you make a loss, above it you make a profit.
What is contribution margin?
It is the part of each sale left after variable costs, which goes towards paying fixed costs and then profit. As a percentage, it is the contribution divided by the selling price.
What if my selling price is lower than the variable cost?
Then every sale increases the loss, and there is no break-even point. You need a higher price or lower variable costs.
Can I use it for a service business?
Yes. Treat one hour, one project or one client as the "unit", and enter the price and the direct cost of delivering it.