Find the sales volume where your revenue exactly covers your costs.
Break-even point is the sales volume at which your total revenue exactly equals your total costs — below it you're operating at a loss, above it every additional sale contributes to profit. It's one of the most useful early numbers for a new product, service, or business, because it answers "how many do I actually need to sell before this is viable?"
The calculation is straightforward: fixed costs (rent, salaries, subscriptions — costs that don't change with sales volume) divided by the contribution margin per unit (selling price minus variable cost per unit — what each sale actually contributes toward covering fixed costs after direct costs are paid).
This gives break-even in units and in revenue. It assumes selling price and variable cost per unit stay constant regardless of volume, which is a simplification — real-world bulk discounts, seasonal pricing, or step-changes in fixed costs (like needing a second location) aren't modeled here.
Fixed costs stay the same regardless of how much you sell — rent, salaries, software subscriptions. Variable costs scale with each unit sold — raw materials, packaging, per-unit shipping.
You’d lose money on every sale regardless of volume — there’s no break-even point until pricing or costs change, since the contribution margin is negative.
No, this is a pre-tax break-even calculation on revenue and direct costs only.