Rent, salaries, insurance, software, loan payments — costs that don't change with sales.
The break-even formula
Break-even units = Fixed costs ÷ (Price − Variable cost per unit). The part in brackets is the contribution margin: what each sale contributes toward fixed costs. Once fixed costs are covered, every additional sale's contribution margin becomes profit. To find the units needed for a profit target, add the target to fixed costs before dividing.
Three ways to lower your break-even
- Raise price. A small price increase often moves break-even more than a large cost cut, because it flows straight into contribution margin.
- Reduce variable cost per unit. Renegotiate supplier pricing, reduce waste, or change packaging and shipping.
- Cut or delay fixed costs. Shared space, month-to-month software, or outsourcing instead of hiring.
Divide break-even units by your working days. If you need 25 sales a day and you currently average 8, the plan needs a different price, cost structure or channel — not just more effort.
Pair this with the margin calculator and the guide to pricing products and services.