Break-Even Calculator
Find how many units you need to sell to cover all costs.
Break-Even Analysis: The First Step in Financial Planning
Break-even analysis is fundamental to any new business or product launch — it answers the critical question: "How many units do we need to sell to stop losing money?" It separates fixed costs (rent, salaries, software — paid regardless of sales) from variable costs (materials, shipping — paid per unit sold) and tells you the minimum sales volume needed to cover all costs. Understanding your break-even point guides pricing decisions, capacity planning and investment justification.
Frequently Asked Questions
What is break-even point and how to calculate it? ▼
Break-Even Point (units) = Fixed Costs ÷ Contribution Margin Per Unit. Contribution Margin = Selling Price − Variable Cost Per Unit. Example: Fixed costs ₹1,00,000/month, Variable cost ₹150/unit, Selling price ₹500/unit → CM = ₹350 → BEP = 1,00,000 ÷ 350 = 286 units/month.
What is contribution margin and why does it matter? ▼
Contribution Margin (CM) = Revenue − Variable Costs. It is the amount each sale "contributes" towards covering fixed costs and generating profit. CM Ratio = CM ÷ Revenue × 100. A high CM ratio means faster break-even. If CM is negative, you lose money on every sale regardless of volume — unsustainable.
How does pricing affect break-even point? ▼
Higher selling price → higher contribution margin → lower break-even point. Example: raising price from ₹500 to ₹600 (₹100 increase) with same ₹150 variable cost raises CM from ₹350 to ₹450 — reducing BEP from 286 to 222 units. Pricing is one of the most powerful levers for reducing break-even.
What is the break-even revenue formula? ▼
Break-Even Revenue = Fixed Costs ÷ CM Ratio. CM Ratio = (Selling Price − Variable Cost) ÷ Selling Price. Example: Fixed costs ₹1,00,000, CM ratio 70% → BEP Revenue = ₹1,00,000 ÷ 0.70 = ₹1,42,857. This is the total revenue needed to break even.
How to use break-even analysis for a new product launch? ▼
Before launching: (1) List all fixed costs (setup, tooling, marketing minimum), (2) Identify variable cost per unit, (3) Set target selling price, (4) Calculate BEP, (5) Compare BEP to realistic market demand — if your BEP is 10,000 units but the market only buys 2,000, the business is not viable at that cost/price structure.