Break-Even Calculator

Break-even analysis is a financial calculation that determines the point at which total revenue equals total costs. At this point, a business is neither making a profit nor incurring a loss. It's a critical metric for new businesses, product launches, or when evaluating changes to your pricing or cost structure.

Fixed costs remain the same regardless of production volume - like rent, salaries, and insurance. Variable costs change directly with production - such as raw materials, direct labor, and packaging costs per unit. Understanding this distinction is essential for accurate break-even analysis.

To determine your fixed costs, add up all expenses that remain constant regardless of your production or sales volume. This typically includes: rent/mortgage, salaries and wages of permanent staff, insurance premiums, loan payments, equipment leases, depreciation expenses, and administrative costs. Review your financial statements and categorize each expense as either fixed or variable.

Contribution margin is the revenue remaining after subtracting variable costs, which contributes to covering fixed costs and eventually generating profit. It's important because it helps you understand how each product contributes to your bottom line and allows you to make informed decisions about pricing, production volumes, and product mix.

Break-even analysis can guide many business decisions: pricing strategy (understand how price changes affect your break-even point), production planning (determine minimum production levels needed), cost management (identify which costs have the greatest impact), investment decisions (assess how new equipment affects your break-even), and sales forecasting (set realistic sales targets beyond the break-even point).