Finance & Tax
Break-even Calculator
Find the sales volume at which revenue covers all costs
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Rent, salaries, software — costs that don't vary with sales volume.
Materials, packaging, commission — costs that scale with each sale.
Contribution margin
40%
Break-even units
Break-even revenue
How does it work?
The break-even point is the sales volume at which total revenue exactly equals total cost — the moment your business starts making money on the next unit sold. Every unit sold above break-even contributes its full contribution margin to profit.
Contribution margin: the engine of break-even
Contribution margin per unit is the price minus the variable cost. It's the amount each sale 'contributes' toward covering fixed costs. Once contribution margin × units sold equals fixed costs, you've broken even.
Contribution margin = Price per unit − Variable cost per unit
Break-even formula
Divide your fixed costs by the contribution margin to get the unit volume, then multiply by price to get the break-even revenue.
Break-even units = Fixed costs ÷ Contribution margin | Break-even revenue = Break-even units × Price
Worked example
A coffee shop has the following monthly figures:
- Fixed costs (rent + salaries): 10,000 SAR/month
- Variable cost per cup (beans + cup + lid): 6 SAR
- Selling price per cup: 10 SAR
- Contribution margin = 10 − 6 = 4 SAR/cup
- Break-even units = 10,000 ÷ 4 = 2,500 cups
- Break-even revenue = 2,500 × 10 = 25,000 SAR
When is break-even impossible?
If your variable cost exceeds your selling price, every sale loses money — you can never reach break-even regardless of volume. You need to either raise prices, reduce variable costs, or both before scaling.
Practical tips
- Recalculate whenever fixed costs change (new lease, new hire).
- Track contribution margin per SKU — drop the ones below your target.
- Use break-even as a sanity check before launching a new product.
- Beyond break-even, every unit adds its full contribution margin to profit.
Frequently Asked Questions
What is contribution margin and why does it matter?
Contribution margin is the price minus the variable cost per unit. It is the per-sale amount that contributes to covering fixed costs and then profit. The higher it is, the fewer sales you need to break even.
What if my variable cost is higher than my selling price?
You can never break even — every sale deepens your loss. You must raise prices, cut variable costs, or both before scaling.
Are taxes considered in break-even?
The classic break-even formula uses pre-tax figures. To compute a target after-tax profit, add the target net profit to the fixed costs in the formula.
How does break-even relate to profit?
Once you exceed the break-even volume, every additional unit sold adds exactly its contribution margin to your profit — fixed costs are already covered.
Should I round break-even units up or down?
Always up — partial units don't pay rent. Selling 2499 cups means you're still 4 SAR short of break-even.
How often should I recalculate break-even?
Whenever a major fixed cost changes (new lease, new hire) or whenever your variable cost shifts materially (supplier change, raw-material price change).
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