My margin is negative — what now?

You're losing money on every sale. Either raise prices, cut variable costs (cheaper materials/suppliers), or rethink the product. Selling more won't help — it'll just lose money faster.

Should I include taxes in fixed costs?

Income tax: no (it's a percentage of profit, not fixed). Property tax / business license fees: yes. Sales tax: no — you collect and remit it, it's not your cost.

What is the contribution margin?

Contribution margin per unit = price − variable cost — the dollars each sale "contributes" toward covering fixed costs and then profit. Once cumulative contribution margin equals fixed costs, you have broken even.

How is break-even different from payback period?

Break-even is a units-and-revenue concept (when do operating profits turn positive?). Payback period is a capital-investment concept (how many months until cumulative cash flow recovers an up-front spend?). Use payback for project-go-decisions; break-even for ongoing operations.

My margin is negative — what now?

You're losing money on every sale. Either raise prices, cut variable costs (cheaper materials/suppliers), or rethink the product. Selling more won't help — it'll just lose money faster.

Should I include taxes in fixed costs?

Income tax: no (it's a percentage of profit, not fixed). Property tax / business license fees: yes. Sales tax: no — you collect and remit it, it's not your cost.

What is the contribution margin?

Contribution margin per unit = price − variable cost — the dollars each sale "contributes" toward covering fixed costs and then profit. Once cumulative contribution margin equals fixed costs, you have broken even.

How is break-even different from payback period?

Break-even is a units-and-revenue concept (when do operating profits turn positive?). Payback period is a capital-investment concept (how many months until cumulative cash flow recovers an up-front spend?). Use payback for project-go-decisions; break-even for ongoing operations.

Break-Even Calculator

Units (and revenue) you need to sell to cover your fixed costs.

Result

Break-even units

217 units/month

Break-even revenue$10,633.00
Per-unit contribution margin$37.00
Contribution margin %75.5%
Total variable costs at break-even$2,604.00
Per-day equivalent (30-day month)7.2 units

How to use this calculator

Add up all your monthly fixed costs (rent, salaries, software, insurance — anything that doesn't change with sales volume).
Enter the price you charge per unit (or per subscriber for SaaS).
Type the variable cost per unit (materials, payment processing, hosting per user).

About this tool

The break-even number is the most basic question in business: how many units do you need to sell each month to cover your fixed costs? Subtract variable cost from price to get your contribution margin (the dollars per sale that go toward fixed overhead and profit). Divide your monthly fixed costs by that margin and you have the break-even number — sales above this turn into actual profit. If your margin is zero or negative, you can't break even — fix that before scaling.

How it works — the formula

Break-even units = Fixed costs / (Price − Variable cost)
Break-even revenue = Break-even units × Price
Contribution margin % = (Price − Variable cost) / Price

Break-even analysis comes from cost-volume-profit (CVP) accounting: the level of unit sales at which total revenue exactly covers the sum of fixed and variable costs, leaving zero profit. The contribution margin per unit (price minus variable cost) measures how much each sale contributes toward covering fixed costs. Once cumulative contribution margin equals fixed costs, every additional sale becomes profit.

Sources: US SBA — Calculate your startup costs · Brigham EF & Houston JF — Fundamentals of Financial Management, Ch. 11 Cost of Capital and CVP analysis · AICPA — Management Accounting principles (Statement on Management Accounting 4U: Developing Comprehensive Performance Indicators)

Worked examples

Example 1

Software SaaS with $20k/mo overhead

Inputs:: Fixed = $20,000/mo, Price = $50/mo subscription, Variable = $5/mo (hosting)
Output:: Break-even ≈ 445 paying customers; contribution margin = 90%

Example 2

Manufactured product

Inputs:: Fixed = $100,000 setup, Price = $40/unit, Variable = $25/unit
Output:: Break-even ≈ 6,667 units sold; contribution margin = 37.5%

Example 3

Negative-margin warning

Inputs:: Price = $20, Variable = $25
Output:: Contribution margin = −$5; no quantity of sales reaches break-even — pricing or cost structure must change first

Limitations

Assumes a constant sale price — discounts, volume tiers, and price wars all shift the line.
Assumes variable cost per unit is truly proportional — bulk discounts, capacity steps, and overtime push real curves non-linear.
Fixed vs variable is a simplification; many costs are mixed (semi-variable) and need decomposition.
Ignores time value of money — for capital projects, pair with NPV or IRR analysis.

Break-even analysis is a planning tool, not a guarantee of profitability. This calculator does not provide accounting or business advice — consult a CPA or business advisor for decision-grade modeling.

Frequently asked

Anything that's the same whether you sell 1 unit or 1000: rent, salaried staff, monthly software, insurance. NOT: materials, shipping, payment fees, hourly contractors paid per project.