How much do you need to sell before your business stops losing money? It's the most practical question a founder can ask, and far too many launch without a precise answer. The break-even point gives you that number in seconds from three figures you already know.
👉 Try the break-even calculator
What the break-even point actually means
Break-even is the sales level at which total revenue exactly equals total costs. Profit is zero: you're not losing money, and you're not making any either. Below it you're burning cash; above it, every sale contributes to profit. It can be expressed in units, in dollars of revenue, or as the month of the year you cross the line.
The formula
Three ingredients:
- Fixed costs — rent, insurance, software subscriptions, accounting, salaried staff, equipment depreciation. They hit whether you sell zero units or a thousand.
- Selling price per unit — what the customer actually pays, excluding sales tax.
- Variable cost per unit — materials, packaging, shipping, payment processing, per-order fulfillment.
Price minus variable cost gives the contribution margin: the amount each sale contributes toward fixed costs. So:
Break-even units = Fixed costs ÷ Contribution margin per unit
Multiply the result by price and you get break-even revenue in dollars.
A worked example: a candle business
Maya runs a candle studio in Brooklyn. Her annual fixed costs are $12,000: $600/month studio rent, $100/month for insurance and Shopify, plus $3,600 in advertising. Each candle sells for $50 and costs her $20 in wax, glassware, labels and shipping.
- Contribution margin: $50 − $20 = $30 per candle, a 60% margin rate.
- Break-even: $12,000 ÷ $30 = 400 candles per year.
- Break-even revenue: 400 × $50 = $20,000.
That's about 34 candles a month. Candle number 401 puts $30 straight into profit. Maya now knows whether that volume is realistic given her production capacity and her audience size.