The short answer: your break-even point is the amount you need to sell to cover all your costs — no profit, no loss. It’s calculated as fixed costs ÷ (price − variable cost per unit). Below it you lose money; above it you profit. Knowing it turns vague targets into a clear number.
The building blocks
- Fixed costs — costs that don’t change with sales: rent, salaries, subscriptions.
- Variable cost per unit — the cost of each item sold (mainly cost of goods).
- Contribution — price minus variable cost; what each sale contributes to fixed costs.
(See fixed vs variable costs if those terms are new.)
The formula and an example
Break-even units = Fixed costs ÷ (Price − Variable cost per unit). Say your fixed costs are 100,000 a month, you sell items at 500, and each costs you 300. Contribution is 200 per item. Break-even = 100,000 ÷ 200 = 500 units a month. Sell more than 500 and you profit; fewer and you’re making a loss.
Why break-even is so useful
- Targets — a concrete monthly sales number to clear before you profit.
- Pricing — see how a price change moves your break-even.
- Decisions — test whether a new cost (extra staff, bigger rent) is worth it.
- Confidence — you know exactly where the line is.
Watch it move with your numbers
Break-even shifts as costs and prices change. RushFlow keeps your costs, prices and sales in one place, so your targets stay grounded in real figures. See the live demo.