What break-even means
Your break-even point is the level of sales where total income exactly covers total costs: no profit, no loss. Below it you lose money every month; above it, each extra sale adds profit. Knowing this number turns vague worry into a clear daily target.
Contribution per unit = price − variable cost
Break-even units = fixed costs ÷ contribution per unit
Units for a profit target = (fixed costs + target) ÷ contributionWorked example
Fixed vs variable costs
| Fixed (same every month) | Variable (rise with each sale) |
|---|---|
| Rent, salaries, loan EMIs | Raw materials, ingredients |
| Software, internet, phone plans | Packaging |
| Insurance, licences | Delivery and courier |
| Your own minimum drawings | Marketplace or payment gateway fees |
Include a salary for yourself in fixed costs. A business that only breaks even because the owner works for free isn't really breaking even.
Three levers to reach break-even sooner
- Raise prices: often the most powerful lever, because the whole increase goes to contribution.
- Cut variable costs: buy in bulk, reduce wastage, renegotiate delivery rates.
- Trim fixed costs: share space, move subscriptions to annual plans, delay non-essential hires.
To set prices that include overheads and platform fees, use the product pricing calculator.
Break-even for a new product or shop
Before launching something new, run the calculator three times: with your expected price and costs, with a price 10% lower (competition), and with costs 10% higher (price rises). If the break-even volume in the worst case still looks achievable, the idea has a cushion. If only the best case works, rethink the price, the costs or the size of the launch.
Frequently asked questions
What's the difference between break-even units and break-even sales?
Units is the number of items; sales is units × price. Both describe the same point.
How do I calculate break-even for many products?
Use your average selling price and average variable cost across products, weighted by how much of each you sell.
Should loan EMIs count as fixed costs?
Yes, for cash-flow planning. The interest part is a business expense; the principal part is repayment, but both must be covered every month.