Break-Even Analysis Calculator: Find Your Business’s Break-Even Point

For instance, if you negotiate cheaper raw materials, plug the new variable cost into your formula and see how many fewer units you need to sell now. Or if you’re considering a price hike, calculate the new break-even and also consider best- and worst-case scenarios for sales volume. By iterating like this, you can find an optimal path where your break-even is as low as possible and your business model remains attractive to customers. Before you roll out something new, it’s smart to run a break-even analysis just for that product or service. Add up all the related costs — like production, design, marketing, and any new tools or equipment needed — and calculate how many sales you need to cover them.

How To Calculate Your Break-Even Point Effectively

By using Excel to calculate the break-even point, businesses can quickly and easily analyze their data and identify areas for improvement. While break-even analysis has its limitations, it remains an essential tool for businesses to optimize their operations and achieve profitability. This means that the company needs to sell at least 200 units to cover its fixed and variable costs. The break-even point (BEP) is when your total revenue equals your total costs. At this point, you’re not making a profit, but you’re not losing money either. ? If you’ve ever wondered how many units you need to sell to start making a profit, the break-even point is the answer.

We recommend consulting a qualified professional for expert guidance. Calculoonline.com is not responsible for any errors or omissions in the calculations or misuse of the results. Having a successful business can be easier and more achievable when you have this information. It makes the difference from operating at a loss to achieving financial goals and expanding production.

Cheaper phones manufactures will happily flood the market as they are looking at a smaller profit margin with the aim of high unit sales. Achieving profitability is crucial for gross accounting vs net accounting any business, and knowing your break-even point helps you understand how many units you need to sell to cover costs. Use our Break-Even Analysis Calculator to determine when your revenue will match your expenses, ensuring a strategic approach to managing your finances. Break-even analysis is a crucial financial planning tool that helps businesses understand their cost structure and pricing strategy. Break-even analysis determines the point where total revenue equals total costs, showing when your business starts making a profit.

Video Productions has net income at volumes greater difference between budget and forecast than 5,000, but it has losses at volumes less than 5,000 units. Break-even analysis looks inward — at your costs and prices — but the market around you matters too. A plan that requires capturing 5% of a market might seem doable, but if that market is crowded and competitive, it might be harder than you think.

By leveraging break-even analysis, you can gain valuable insights into your business’s financial health, empowering you to drive growth and profitability. Yes, this break-even calculator is free and provides accurate estimates for your business planning. Use our Break-Even Analysis Calculator to quickly estimate when your business will become profitable, helping you make smarter pricing and sales decisions. The calculation tools and results provided on Calculoonline.com are based on artificial intelligence (AI) and are intended to provide estimates. While calculations are performed automatically, accuracy of the results is not guaranteed.

Optimize Your Business Strategy with Break-Even Analysis

Schedule a consultation with our expert team at Business Initiative to discuss business registration and formation services. Click the calculate button to find your break-even point in units and dollars. Wouldn’t it be great if there was a tool that would allow you to quickly and easily estimate and graph a company’s break-even point?

To illustrate the calculation of a break-even point in units, Video Productions produces videotapes selling for USD 20 per unit. Fixed costs per period total USD 40,000, while the variable cost is USD 12 per unit. A company breaks even for a given period when sales revenue and costs incurred during that period are equal. Thus the break-even point is that level of operations at which a company realizes no net income or loss. If you’re a startup or small business, consider scheduling a session with an AOF business advisor (it’s free coaching that could uncover cost savings or pricing opportunities you hadn’t considered). And if you’re looking for funding to take your business to the next level, check out AOF’s Small Business Term Loans – you can apply online in minutes and get personalized funding options.

Pricing Strategy

The break-even point is the point at which the total revenue equals the total fixed and variable costs. It’s an important metric for businesses to understand, as it helps them make informed decisions about pricing, production, and investment. A Break-Even Analysis is an essential tool for understanding the financial health of your business and helps guide decisions on pricing, cost management, and sales targets. By determining the break-even point, you can calculate how much revenue is needed to cover both fixed and variable costs, ensuring you can achieve profitability.

It is based on information and assumptions provided by you regarding your goals, expectations and financial situation. The calculations do not infer that the company assumes any fiduciary duties. The calculations provided should not be construed as financial, legal or tax advice. In addition, such information should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy.

For example, the total revenue curve is simply the product of selling price times quantity for each output quantity. The data used in these formula come either from accounting records or from various estimation techniques such as regression analysis. For example, a business that sells tables needs to make annual sales of 200 tables to break-even. At present the company is selling fewer than 200 tables and is therefore operating at a loss. As a business, they must consider increasing the number of tables they sell annually in order to make enough money to pay fixed and variable costs. Thinking of buying new equipment, hiring staff, or launching a new product?

This provides motivation to work toward your goals and forms a Key Performance Indicator (KPI) that your sales and operations teams can use as a tangible benchmark for success. Increasing the selling price decreases the number of units required to break even, while decreasing it has the opposite effect. Break-even analysis is just one part of running a successful business. Vertices provides detailed financial guidance, helping you price smarter, optimize costs, and maximize profits. It helps prevent financial losses by ensuring prices are set high enough to cover all costs while remaining competitive. When expanding to a new market or launching a new product line, break-even analysis can help you estimate the level of sales needed to achieve profitability.

Break-Even Point in Units

Before we turn to the calculation of the break-even point, it’s also important to understand contribution margin. If you’ve identified, say, an expansion opportunity that will ultimately boost profits or lower your unit costs (thereby improving break-even), a term loan from AOF can help you seize it. But unlike many lenders, we don’t just hand you money and walk away. With the break even result you can start to analyze the micro components that create the overall cost. Quantifying those components correctly allows you to identify areas where you may be able to cut costs.

Companies frequently measure volume in terms of sales dollars instead of units. For a company such as General Motors that makes not only automobiles but also small components sold to other manufacturers and industries, it makes no sense to think of a break-even point in units. Contribution margin is the portion of revenue that is not consumed by variable cost. In a simple example, if you were to buy a candy bar for 75 cents and resell it for $1, then the contribution margin would be 25 cents—the amount not consumed by cost. Calculating and leveraging your break-even point can be challenging, especially if finance isn’t your forte. Accion Opportunity Fund (AOF) is not just a lender – we’re a partner in your business journey, offering tools and guidance to help you reach break-even and beyond.

If you are looking to make and investment or startup your own business, it is important to know your break even point first.
By identifying the break-even point, entrepreneurs can make informed decisions about pricing, cost management, and sales strategies, ultimately enhancing profitability and sustainability.
Conversely, a low contribution margin (due to low pricing or high variable costs) means you need a larger volume of sales to reach break-even.
By analyzing the numbers first, you’ll feel more confident whether you’re deciding on a marketing budget, an expansion, or any big move.
Some common examples of fixed costs include rent, insurance premiums, and salaries.

Business Planning

A break-even analysis relies on three crucial aspects of a business operation – selling price of a unit, fixed costs and variable costs. Your business changes — prices go up, you add staff, new software gets added, or you expand services. If you don’t update your break-even numbers, you might be relying on outdated info and thinking you’re what’s the difference between a credit memo credit and a refund profitable when you’re not. Make it a habit to revisit your break-even calculations at least annually or whenever you change something major — like pricing, product lines, or expenses. Staying up to date keeps your goals and decisions grounded in reality.

You can figure out how long it would take to recover the costs and whether the extra expenses will really pay off. For instance, if a new machine cuts costs per unit but adds monthly overhead, you can calculate exactly how many more units you’d need to sell to justify the investment. Many businesses used this approach during the pandemic to evaluate survival strategies — and it’s just as useful for growth plans. Most businesses will calculate break-even for a given period (usually per month or per year) as part of their financial planning.

The break-even point is the point at which the total cost of production equals the total revenue generated.
Break-even analysis is a fundamental financial tool that helps businesses determine the point where total costs (both fixed and variable) equal total revenue.
Let us go through a break-even analysis step by step to illustrate its usefulness with a real-life example of starting a business.
In some cases, it’s smart to shift how your costs are categorized.
The break-even point (BEP) in economics, business—and specifically cost accounting—is the point at which total cost and total revenue are equal, i.e. “even”.

Start by examining every regular cost – can you negotiate rent or move to a more affordable space? Even temporary cuts like pausing software subscriptions during off-season can make a difference. Don’t slash anything essential to generating revenue, like key staff or basic operational tools. This means that we need to sell at least 200 t-shirts per month to cover our fixed and variable costs. You might want to add new products to sell to reach the break even point.