Break-Even
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Break-Even Analysis: The Most Important Calculation for Your Startup

Break-even analysis answers the most fundamental question in business: how much do you need to sell before you start making money? Every successful founder knows their break-even point — and reviews it regularly as costs and pricing evolve.

This free break-even calculator computes your break-even point three ways: in units, in revenue, and in time. It includes what-if scenarios so you can see how changes in price or costs affect your path to profitability.

The Break-Even Formula

The break-even formula is deceptively simple: Break-Even Point = Fixed Costs ÷ Contribution Margin Per Unit. The contribution margin is the difference between your selling price and variable cost per unit. It represents the amount each sale “contributes” toward covering your fixed costs.

For example, if your monthly fixed costs are $10,000, you sell a product for $50, and each unit costs $20 to produce: your contribution margin is $30, and you need to sell $10,000 ÷ $30 = 334 units per month to break even.

Fixed Costs vs. Variable Costs

Understanding the difference between fixed and variable costs is essential for accurate break-even analysis:

• Fixed costs stay the same regardless of sales volume: rent, salaries, insurance, software subscriptions, loan payments
• Variable costs change with each unit sold: raw materials, shipping, sales commissions, payment processing fees, per-user hosting costs

For SaaS companies, most costs are fixed (engineering salaries, infrastructure base costs), with very low variable costs per user. This is why SaaS businesses have such attractive unit economics — once you pass break-even, almost all additional revenue is profit. Calculate your margins with our Profit Margin Calculator.

Why Contribution Margin Matters

The contribution margin is the lever that determines your break-even point. A higher contribution margin means you need fewer sales to cover fixed costs. There are only two ways to increase it: raise your price or lower your variable costs per unit.

The contribution margin ratio (contribution margin ÷ price) tells you what percentage of each dollar of revenue contributes to covering fixed costs. SaaS businesses typically have contribution ratios of 80–95%, while physical product businesses range from 30–60%.

How to Use Break-Even Analysis for Pricing

One of the most powerful uses of break-even analysis is evaluating pricing decisions. The what-if scenarios in this calculator show you: what happens if you raise prices 20%? What if costs increase? Use this to:

• Set minimum viable prices: Know the lowest price at which your business can survive
• Evaluate new products: Before launching, know how many units you need to sell
• Plan growth: See how quickly you'll turn profitable at different sales volumes
• Pitch investors: Show your path to profitability with real numbers. Build your full plan with our Business Plan Generator

Break-Even Timeline for Different Business Models

How quickly should you expect to break even?

• SaaS: 12–24 months (high fixed costs, very low variable costs, fast scaling)
• E-commerce: 6–18 months (moderate fixed costs, significant variable costs)
• Consulting/Services: 1–6 months (low fixed costs, labor-intensive)
• Hardware/Manufacturing: 18–36 months (high fixed costs, moderate variable costs)

Track your progress toward break-even with our MRR/ARR Growth Calculator and Startup Runway Calculator.

Frequently Asked Questions

What is a break-even point?

The break-even point is the number of units you need to sell (or revenue you need to earn) to cover all costs. At break-even, total revenue equals total costs and profit is zero. Selling more makes you profitable; selling less means you're operating at a loss.

How do you calculate break-even point?

Break-Even Point (units) = Fixed Costs ÷ (Price Per Unit − Variable Cost Per Unit). For example, $10,000 fixed costs with a $50 price and $20 variable cost = 10,000 ÷ 30 = 334 units.

What is contribution margin?

Contribution margin is the selling price minus the variable cost per unit. It shows how much each sale contributes toward covering fixed costs. A SaaS company with a $49/mo subscription and $5 variable cost has a $44 contribution margin (89.8%).

What are fixed costs vs variable costs?

Fixed costs don't change with sales volume (rent, salaries, insurance). Variable costs change per unit sold (materials, shipping, commissions). For SaaS, most costs are fixed with low per-user variable costs.

How long should it take a startup to break even?

SaaS: 12–24 months. E-commerce: 6–18 months. Services: 1–6 months. Hardware: 18–36 months. Venture-backed startups may operate at a loss longer while investing in growth. The key is having a clear, data-driven path to break-even.