UK Break-Even Calculator

Knowing exactly how much you need to sell before a business starts making money is one of the most useful numbers in running it. This calculator works out your break-even point in both units and revenue, from your fixed costs, price per unit and variable cost per unit, plus how much more you would need to sell to hit a target profit.

How to use the break-even calculator

Enter your fixed costs for the period you are planning around, such as a month or a year, along with your price per unit and your variable cost per unit. Optionally enter a target profit figure if you want to see what it takes to hit a specific profit goal, not just break even. The calculator instantly shows your break-even point in units and revenue, your contribution margin, and the units and revenue needed for your target profit.

How the calculation works

Contribution margin is your price per unit minus your variable cost per unit, the amount each sale contributes towards covering fixed costs and, beyond that, profit. Dividing your fixed costs by this contribution margin gives your break-even point in units, since that is how many units are needed for their combined contribution to exactly cover fixed costs. Multiplying break-even units by price per unit gives break-even revenue. For a target profit, the calculator simply adds your target profit to fixed costs before dividing by contribution margin, since a profit goal is really just an extra cost to cover through sales.

Worked example

A small business with £3,000 in monthly fixed costs, selling a product at £25 with a variable cost of £10 per unit, has a contribution margin of £15, or 60% of the selling price. Break-even is £3,000 ÷ £15 = 200 units a month, worth £5,000 in revenue. To hit a target profit of £1,000 on top, the business would need (£3,000 + £1,000) ÷ £15 = roughly 267 units, worth around £6,667 in revenue that month.

Margin of safety: how much cushion do you have?

Once you know your break-even point, it is useful to compare it against your actual or expected sales, a comparison known as your margin of safety. It is calculated as the difference between your expected sales and your break-even sales, divided by your expected sales, expressed as a percentage. In the example above, a business expecting to sell 300 units a month against a break-even point of 200 units has a margin of safety of (300 − 200) ÷ 300 = 33.3%, meaning sales could fall by roughly a third before the business tipped into a loss. A low or negative margin of safety is a warning sign that a business is more exposed to a dip in sales than it might feel day to day.

Using break-even to test pricing decisions

Break-even analysis is also a useful way to sense-check a pricing change before making it. Raising your price per unit increases your contribution margin, which lowers your break-even point in units, meaning you would need to sell fewer units to cover the same fixed costs, though it may also reduce demand depending on how price-sensitive your customers are. Conversely, cutting your variable cost per unit, for example by negotiating a better supplier rate, has the same effect on contribution margin without touching your price at all. Running a few different price and cost scenarios through this calculator before committing to a change is a quick way to see the effect on your break-even point before it happens in practice.

Break-even with more than one product

This calculator works from a single price and variable cost, which suits a business with one main product or service, or one that wants a quick estimate based on its typical or average sale. A business selling several products at different prices and margins can still use the same underlying approach, but would normally work out a weighted average contribution margin across its full product mix first, based on the proportion of sales each product typically represents, before dividing fixed costs by that blended figure. This gets more complex quickly with a wide product range, and is often better handled in a spreadsheet or with an accountant once a business sells many different lines at very different margins.

Common mistakes to avoid

A common mistake is misclassifying costs, particularly treating a cost that actually scales with sales, like packaging or transaction fees, as a fixed cost, which understates the true variable cost per unit and overstates contribution margin. This makes break-even look easier to reach than it really is.

Another mistake is forgetting to update the calculation after a price change, a new supplier cost, or a change to fixed overheads like rent, all of which shift the break-even point. It is also worth remembering that break-even alone does not tell you whether a business is actually a good idea, only the sales volume needed to avoid a loss; profitability at realistic sales volumes, and a healthy margin of safety above break-even, matter just as much as reaching break-even itself.

Related calculators

Once you know your break-even point, our profit margin calculator helps you check your pricing is generating a healthy margin above that point, and our VAT calculator can add VAT to your pricing if you are VAT registered. Once profit is flowing through the business, our Corporation Tax calculator estimates the tax due on it. If you are self-employed rather than running a limited company, our self-employed tax calculator and our self-employed tax guide cover that side of the numbers.