Field note

Break-Even Point: Find the Sales You Need

Calculate the sales volume or revenue that covers your fixed costs before profit begins.

The useful distinction

Break-even is the point where contribution from sales exactly covers fixed costs. It is a useful floor for planning, not a promise of safety.

A simple working method

For a unit calculation, divide fixed costs by selling price minus variable cost per unit. For revenue break-even, divide fixed costs by contribution margin percentage. Use a realistic product mix and label assumptions clearly.

Worked example

Fixed costs of 9,000 and a selling price of 60 with 35 variable cost create 25 of contribution per unit. Break-even volume is 9,000 divided by 25, or 360 units. Selling fewer units leaves fixed costs uncovered under those assumptions.

Common mistakes

• Using revenue instead of contribution per unit
• Ignoring a changing product mix
• Treating the calculated point as a cash safety guarantee

When this number can mislead

Break-even assumes the price, variable cost and fixed-cost period stay stable. Capacity limits, seasonality, late collections and step costs can make the real path uneven. Run a downside case as well as the base case.

Frequently asked questions

What if contribution is zero or negative?

There is no finite break-even volume until price rises, variable cost falls or the offer changes.

Does break-even include profit?

No. Break-even covers the modeled fixed and variable costs. Add a desired profit amount if you want a sales target above break-even.

Why can my actual break-even differ?

Product mix, step costs, seasonality, capacity and cash collection timing can make real results differ from a single-product estimate.

Decision checklist

• Set a clear time period for fixed costs.
• Confirm contribution per unit is positive.
• Run a downside case for price, volume and variable cost.

Definition and formula context: U.S. SBA break-even guidance.

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