Input values
- Fixed costs: $12,000
- Selling price per unit: $70
- Variable cost per unit: $45
Guide
Break-even Formula
The break-even formula shows how much you need to sell before the business covers its fixed costs. It is one of the fastest viability checks for a product, service, or offer that still needs volume to work.
Core formula
Use contribution margin, not total price
Break-even depends on how much each sale contributes after variable cost. That is why the gap between selling price and variable cost matters more than revenue alone.
Break-even units = Fixed costs / (Selling price per unit - Variable cost per unit)
The bottom part of the formula is contribution margin per unit. That is the money each sale contributes toward covering fixed costs.
Worked example
How the formula works in practice
If fixed costs are $12,000, selling price is $70, and variable cost is $45, each sale contributes $25. Divide $12,000 by $25 and the business needs 480 units to break even.
Output
- Contribution margin per unit: $25
- Break-even units: 480
- Break-even revenue: $33,600
Interpretation
Three levers can lower the break-even point
If the number looks too high, there are only a few ways to bring it down: raise the selling price, lower variable cost, or reduce fixed costs.
Most common levers
- Improve pricing or markup discipline
- Lower cost per unit or payout burden
- Reduce fixed overhead before launch
Where people get stuck
- The selling price is built from the market, not from cost.
- Commission or discount pressure erodes contribution margin.
- Fixed costs are loaded into the offer too early.
FAQ
Common questions about the break-even formula
What is contribution margin?
Contribution margin is the selling price minus variable cost per unit. It shows how much each sale contributes toward fixed costs and then profit.
What happens if contribution margin is very small?
Break-even units rise quickly. A weak gap between price and variable cost means the business needs much more volume to become viable.
Can the break-even formula be used for services?
Yes. The same logic works for workshops, retainers, packages, or service delivery as long as you can estimate fixed cost, variable cost, and selling price.
Next steps
Use the calculators to pressure-test the model
Once the formula makes sense, move into the live tools to test pricing, contribution margin, and payout pressure on the same offer.