Starting a business? This break-even calculator allows you to perform a task crucial to any entrepreneurial endeavor. The goal of a break-even analysis is to let you know how many units of goods you need to sell in order to cover all of your outgoing costs (cost of goods sold and other, fixed costs that are not tied to the quantity of inventory). Please go ahead and use the calculator, we hope it's fairly straightforward. If you'd rather calculate it manually, we have described how to calculate break-even point below, and even explained what is the break-even point formula.
How to calculate break-even point
- Find out how much you make on every unit. For example, if you buy for
$30and sell for
$45, your gross profit per item is
$15(let's assume you don't have other per-unit costs).
- Identify your fixed costs. In our example, we'll spend
$2700(office rent, utilities, etc.)
- Divide your fixed costs by the profit you make on every unit -
$2700 / $15 = 180- this is how many units you need to sell.
- The overall sales figure is easy:
180 * $45 = $8100.
- Your done!.. or use our break-even calculator :-)
The manual break-even analysis is super easy once you realize that you simply need to balance fixed costs with gross profit. Let's go you through the whole process:
- The general equation is
fixed_costs = per_unit_profit * number_of_units
- Let's expand the profit. It's comprised of costs and revenue:
fixed_costs = (per_unit_revenue - per_unit_costs) * number_of_units
- We need to sell
number_of_units = fixed_costs / (per_unit_revenue - per_unit_costs)
- We need to talk in terms of dollars brought in, so this changes the break-even point formula to:
total_revenue = per_unit_revenue * fixed_costs / (per_unit_revenue - per_unit_costs)