Break-Even Analysis: Calculate Your Break-Even Point (2026)

Last updated: June 2026 · 7 min read · Business Planning

Before scaling a business, know your break-even point: the sales volume where revenue equals costs. This critical milestone determines how long you can survive and when profit begins.

What is Break-Even Point?

Break-even point is when Total Revenue = Total Costs. Below this point, you're losing money. Above it, you're profitable.

Fixed vs Variable Costs

Type	Definition	Example
Fixed Costs	Don't change with sales volume	Rent, salary, insurance
Variable Costs	Scale with each sale	Materials, packaging, commission

The Formula

Break-Even Units = Fixed Costs / (Price per Unit - Variable Cost per Unit)

Or in revenue terms:

Break-Even Revenue = Fixed Costs / Contribution Margin %

Worked Example

You sell digital courses at $99/each. Monthly costs:

Fixed costs: $3,000 (hosting, tools, management)
Variable costs per sale: $9 (payment processing, hosting)
Contribution margin: $99 - $9 = $90

Break-even units = $3,000 / $90 = 34 courses/month

Break-even revenue = $34 × $99 = $3,366/month

Use Cases

Startup: Know how many customers you need before profit
New product: Determine if pricing covers costs
Expansion: Figure out overhead impact on profitability
Pricing: Ensure prices are high enough to survive

Safety Margin

Successful businesses operate at 20-40% above break-even to account for uncertainty.

If break-even is 100 units and you sell 150 units, your safety margin is 33%.