Your break-even point is the amount you must sell to cover your costs — the moment your business stops losing money and starts making it. Knowing it turns pricing and sales targets from guesswork into arithmetic. This guide gives the formula, a worked example, and how to use it.

What is the break-even point?

The break-even point is the level of sales at which total revenue exactly equals total costs, so profit is zero. Sell one unit more and you are in profit; one less and you are at a loss. It is one of the most useful numbers a small business can know.

The break-even formula

Break-even in units uses your fixed costs and your contribution margin per unit (selling price minus variable cost):

Break-even (units) = Fixed costs ÷ (Selling price − Variable cost per unit)

Fixed costs are those that do not change with sales, like rent; variable costs rise and fall with sales, like the stock you sell — see fixed vs variable costs.

A worked example

Suppose your fixed costs are $8,000 a month, you sell a product for $50, and each unit costs you $30.

  • Contribution margin per unit = $50 − $30 = $20.
  • Break-even = $8,000 ÷ $20 = 400 units a month.

You must sell 400 units just to cover costs; unit 401 is where profit begins.

Break-even in sales dollars

To get the revenue you need rather than units, use the contribution-margin ratio (contribution margin ÷ price):

Break-even ($) = Fixed costs ÷ Contribution-margin ratio

In the example the ratio is $20 ÷ $50 = 0.4, so break-even = $8,000 ÷ 0.4 = $20,000 in sales.

How to lower your break-even

  • Raise price or improve product mix to lift contribution margin — see pricing for profit.
  • Cut variable cost by buying better or reducing waste.
  • Reduce fixed costs where you can, so less sales are needed to cover them.

Know your break-even automatically

RushFlow tracks your costs and margins as you trade, so you can see how close you are to break-even and how pricing changes move it — without rebuilding a spreadsheet each month.