How to calculate your break-even point
Break-even is the sales level where contribution from sales exactly covers fixed costs. Above that point, additional contribution can begin to create operating profit.
Formula
Break-even units = fixed costs ÷ (selling price − variable cost per unit).
Example
With £2,000 fixed costs, a £50 selling price and £20 variable cost, contribution is £30 per sale and break-even is 67 units.
Common mistakes to avoid
- Forgetting variable costs such as card fees or shipping.
- Treating owner salary or recurring software costs inconsistently.
- Assuming demand will automatically exist at the chosen selling price.
ProfitMaths provides general calculation tools and educational information. Results are estimates and are not accounting, tax, legal or financial advice.