Take a café with ₹2,40,000 of monthly overheads that charges ₹180 a cup and spends ₹60 making it. It has to sell 2,000 cups before it earns a single rupee of profit. That figure comes from one division: fixed costs divided by the contribution margin per unit, which is your selling price minus the variable cost of each unit. It is the method the US Small Business Administration sets out for owners, and the free calculator below runs it for you, along with the number of units you would need to hit a profit target.
Key Takeaways
- Units to break even: fixed costs ÷ (price − variable cost per unit).
- Revenue to break even: fixed costs ÷ contribution margin ratio.
- Planning for a profit? Add the target to fixed costs, then divide.
- Price at or below variable cost means no volume of sales will ever get you there.
- Pricing is a powerful lever. In our café example, charging ₹20 more cuts the break-even volume by about 14%.
Break-even calculator
Enter monthly figures. Results update as you type.
Contribution margin / unit
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Price − variable cost
Contribution margin ratio
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Share of each sale left for fixed costs
Break-even units
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Rounded up to whole units
Break-even revenue
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Fixed costs ÷ CM ratio
Units for target profit
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Add a target profit to see this
Your inputs stay in your browser and are not stored or sent anywhere. Results are estimates for planning, not accounting advice.
How to Use the Break-Even Calculator
- Pick your currency. Rupees, dollars or euros, the arithmetic does not change. Only the formatting does.
- Enter fixed costs for one month. These are the bills that arrive whether you sell one unit or a thousand: rent, salaried staff, software subscriptions, insurance, loan repayments.
- Enter your selling price per unit after discounts and without GST or VAT. Tax you collect was never your revenue.
- Enter variable cost per unit. Count anything that goes up with each sale, such as raw materials, packaging, payment gateway fees, marketplace commission, shipping and per-order delivery charges.
- Add a monthly profit target if you have one, and the calculator will show how far past break-even you need to go.
The unit figure is rounded up. Nobody sells two-thirds of a cup, and rounding down would leave you a whisker short of covering your costs. Break-even revenue is shown exactly as the formula produces it.
What Is the Break-Even Point?
It is the level of sales at which total revenue matches total costs: no profit, no loss. Every unit you sell beyond it adds to profit. That is how the SBA describes it. SCORE, the mentoring network funded in part through an SBA cooperative agreement, adds that lenders and investors will ask when a new business expects to get there. Its rule of thumb is to break even within six to 18 months of launch, and to go back over costs and pricing if your numbers suggest a longer wait.
The Formulas Behind the Numbers
Each of the calculator's five outputs comes from standard cost-volume-profit maths, as laid out in the free OpenStax Principles of Managerial Accounting textbook and by the Corporate Finance Institute.
| What you want | Formula |
|---|---|
| Contribution margin per unit | Price per unit − Variable cost per unit |
| Contribution margin ratio | Contribution margin per unit ÷ Price per unit |
| Break-even point in units | Fixed costs ÷ Contribution margin per unit |
| Break-even point in revenue | Fixed costs ÷ Contribution margin ratio |
| Units for a target profit | (Fixed costs + Target profit) ÷ Contribution margin per unit |
| Revenue for a target profit | (Fixed costs + Target profit) ÷ Contribution margin ratio |
Everything hinges on the contribution margin: what is left of each sale once that unit has paid for itself, available first to cover fixed costs and then to become profit. When it is zero or negative, every sale loses money and selling more only digs the hole deeper. That is why the calculator refuses to give an answer if your price does not exceed your variable cost.
One caveat. These formulas work in pre-tax profit. If you are aiming for an after-tax figure, OpenStax says to divide it by (1 − tax rate) first and use the result as your target profit.
Worked Example: Break-Even for a Café in India
Picture a small coffee shop trying to work out how many cups it must sell in a month. The figures are illustrative rather than industry averages, so swap in your own when you use the calculator.
| Input | Value |
|---|---|
| Fixed costs per month (rent, two staff salaries, utilities, POS software, equipment loan EMI) | ₹2,40,000 |
| Average price per cup (excluding GST) | ₹180 |
| Variable cost per cup (coffee, milk, cup and lid, sugar, card or UPI fees) | ₹60 |
| Target profit per month | ₹60,000 |
The working:
| Step | Calculation | Result |
|---|---|---|
| Contribution margin per cup | ₹180 − ₹60 | ₹120 |
| Contribution margin ratio | ₹120 ÷ ₹180 | 66.67% |
| Break-even cups per month | ₹2,40,000 ÷ ₹120 | 2,000 cups |
| Break-even revenue per month | ₹2,40,000 ÷ 0.6667 | ₹3,60,000 |
| Cups for ₹60,000 profit | (₹2,40,000 + ₹60,000) ÷ ₹120 | 2,500 cups |
| Revenue for ₹60,000 profit | ₹3,00,000 ÷ 0.6667 | ₹4,50,000 |
Monthly totals are abstract. Daily ones are not. Spread over 30 days, the café has to pour about 67 cups a day to break even (2,000 ÷ 30 = 66.7) and about 84 to make its ₹60,000 (2,500 ÷ 30 = 83.3). An owner who sells 70 cups on a typical day is barely in the black, and will need more footfall or a fatter margin to reach the profit goal.
Hit Load café example in the calculator to bring up these numbers, then change one input at a time and watch what moves.
Small Price Changes, Big Swings
Every rupee added to or knocked off the price lands straight on the contribution margin, so break-even reacts sharply. Hold the café's fixed costs at ₹2,40,000 and its variable cost at ₹60 a cup, and try five prices.
| Price per cup | Contribution margin | CM ratio | Break-even cups / month | Cups / day (30 days) | Break-even revenue |
|---|---|---|---|---|---|
| ₹150 | ₹90 | 60.00% | 2,667 | 89 | ₹4,00,000 |
| ₹160 | ₹100 | 62.50% | 2,400 | 80 | ₹3,84,000 |
| ₹180 | ₹120 | 66.67% | 2,000 | 67 | ₹3,60,000 |
| ₹200 | ₹140 | 70.00% | 1,715 | 58 | ₹3,42,857 |
| ₹220 | ₹160 | 72.73% | 1,500 | 50 | ₹3,30,000 |
Daily cup counts are rounded up. The table makes two points that surprise many owners:
- Discounts cost more than they appear to. Dropping the price from ₹180 to ₹150 is a one-sixth (16.7%) cut, yet it lifts the break-even volume from 2,000 cups to 2,667, a 33% jump. That is roughly 22 extra customers a day simply to stand still.
- A modest increase buys plenty of breathing room. At ₹200 instead of ₹180, break-even falls to 1,715 cups, about 14% fewer, provided customers keep coming at the higher price.
Variable costs pull in the opposite direction. Should dearer milk and coffee push the cost of a cup from ₹60 to ₹70 while the menu price stays at ₹180, the margin shrinks to ₹110 and break-even climbs to 2,182 cups.
Where Break-Even Analysis Falls Short
Treat break-even as a planning shortcut. It is not a forecast. The textbook model in OpenStax, and the standard list of cost-volume-profit assumptions, depend on simplifications that real businesses break all the time:
- Price is assumed constant. Bulk deals, coupons and marketplace sale prices mean your average price wanders.
- Fixed costs stay fixed only up to a point. Grow past a certain volume and you need another pair of hands, a bigger kitchen or a second machine, and break-even jumps.
- Some costs refuse to be sorted. Electricity, marketing and part-time wages are part fixed, part variable, and putting them in the wrong bucket skews the answer.
- It assumes one product, or a steady mix. A café selling coffee, sandwiches and cakes at different margins has a break-even that shifts whenever the mix does. Work from a weighted average price and variable cost per order, and check it often.
- Demand is not part of the sum. The formula says how many units you need. Whether customers will buy that many at that price is another question.
- Timing and cash are left out. Break-even is an accounting point. Deposits, fit-out and opening stock have to be paid for before the sales come in, and OpenStax notes that front-loaded costs like these may need financing.
- Tax is excluded. The result is pre-tax, so adjust your target profit if you are planning around an after-tax number.
Putting Your Break-Even Number to Work
Break It Into Daily or Weekly Targets
Divide break-even units by the days you trade. Staff can track 67 cups a day, or 15 orders a day, on a whiteboard. Nobody rallies around 2,000 a month.
Set It Against Capacity and Demand
How many units can you actually make or serve, and how many does your forecast say you will sell? If break-even sits near full capacity, the plan is fragile. Accountants call the distance between actual or forecast sales and break-even sales the margin of safety. It tells you how far sales can slide before you start losing money.
Run Decisions Through It First
Thinking of a discount, a higher rent, a new hire or a more expensive supplier? Change that single input in the calculator and see how many extra units the decision demands. SCORE recommends using break-even analysis for exactly this kind of scenario planning, citing examples such as taking on staff or a loan.
Put It in Your Business Plan and Loan Application
Lenders want three things: your break-even volume, the month you expect to hit it and the assumptions underneath. Spelling out the assumptions is what makes the number believable.
Recalculate Regularly
Rents rise, wages move, input prices shift and the product mix changes. Rerun the numbers after any big change in a cost or price, and every quarter regardless.
Related reading: see the break-even maths applied to real launches in our guides to starting a pressure washing business in Florida, a mobile coffee trailer in Texas and a mobile dog grooming business in North Carolina.
FAQ
How Do You Calculate the Break-Even Point in Units?
Divide total fixed costs by the contribution margin per unit, which is the selling price less the variable cost of each unit. Fixed costs of ₹2,40,000 and a ₹120 margin give a break-even of 2,000 units.
How Do You Calculate Break-Even Revenue?
Divide fixed costs by the contribution margin ratio (contribution margin ÷ price). Multiplying break-even units by the price gets you to the same figure.
What Is a Good Contribution Margin Ratio?
No single benchmark applies, because ratios vary widely from one industry to the next. The higher yours is, the more of your fixed costs each sale covers and the fewer sales you need. Measure it against your own history and against businesses with a similar model.
Why Does the Calculator Say I Can Never Break Even?
Because your price is no higher than your variable cost per unit, each sale contributes nothing, or a loss, towards fixed costs. You need a higher price, lower per-unit costs or a rethink of the product.
Should I Include GST in the Selling Price?
No. Use the price before GST or VAT, since that tax goes to the government and is not your revenue. Costs that really are yours, such as payment fees and marketplace commissions, do belong in variable costs.
Is My Owner's Salary a Fixed Cost?
If you plan to pay yourself a regular salary, put it in fixed costs so that break-even describes a business that actually pays its owner. Or leave it out and enter it as your target profit instead.
