Break-Even Calculator
Enter your fixed costs, variable cost per unit, and selling price to find how many units you need to sell to break even.
Reviewed by Richard Ross · Last updated April 2026
How Break-Even Calculator works
Break-even formula
Break-even units = Fixed Costs ÷ Contribution Margin per Unit. Contribution margin = Selling Price − Variable Cost per Unit. Break-even revenue = Fixed Costs ÷ Contribution Margin Ratio.
Fixed vs variable costs
Fixed costs remain constant regardless of production volume: rent, salaries, insurance, software subscriptions. Variable costs change with output: materials, direct labour, packaging, payment processing fees. Classifying costs correctly is essential for an accurate break-even analysis.
Contribution margin
The contribution margin is the amount each unit sold contributes towards covering fixed costs — and then profit once fixed costs are covered. A high contribution margin means fewer units are needed to break even.
Limitations of break-even analysis
Break-even analysis assumes a constant selling price and variable cost per unit, and that all units produced are sold. In practice, volume discounts, bulk purchase savings, and price changes affect the analysis. It is best used as a planning tool rather than a precise forecast.
UK business context: using break-even for business plans
UK lenders and investors — including the British Business Bank, high-street banks, and SEIS/EIS investors — routinely expect a break-even analysis in a business plan. The analysis should use realistic, defensible fixed costs (including the National Living Wage of £12.21/hour from April 2025 for any employees) and account for VAT if the business will be VAT-registered, since VAT on revenue is not yours to keep. Corporation Tax is not a fixed cost but should be factored into your profit-target units calculation.
Worked example: UK coffee shop
A coffee shop has monthly fixed costs of £8,000 (rent £3,000, salaries £4,000, utilities and insurance £1,000). Each cup of coffee sells for £3.50 and has a variable cost of £1.00 (beans, milk, cup), giving a contribution margin of £2.50. Break-even units = £8,000 ÷ £2.50 = 3,200 cups per month, or approximately 107 per day. Adding a target profit of £2,000 per month requires 4,000 cups (133 per day).
Source: GOV.UK — National Living Wage rates (gov.uk/national-minimum-wage-rates). GOV.UK — Corporation Tax rates (gov.uk/corporation-tax-rates). British Business Bank — Business plan guide (british-business-bank.co.uk).
Frequently asked questions
What is a break-even point?
The break-even point is the level of sales at which total revenue equals total costs. Below break-even, the business makes a loss; above it, a profit.
How do I reduce my break-even point?
Either increase your selling price, reduce variable costs per unit, or reduce fixed costs. Reducing fixed costs has the most direct impact since it directly lowers the numerator of the break-even formula.
What is contribution margin?
Contribution margin is the selling price minus variable cost per unit. It represents how much each unit sold contributes to covering fixed costs. Once fixed costs are covered, each additional unit contributes directly to profit.
How is break-even different from profit?
At break-even, total profit is exactly £0 — revenue equals total costs. To calculate the units needed to hit a specific profit target, add the target profit to fixed costs before dividing by the contribution margin.
Should I include VAT in my break-even calculation?
No — use net (ex-VAT) prices throughout. If you are VAT-registered, the VAT element of your revenue belongs to HMRC and is not income. Using gross (VAT-inclusive) prices as your selling price will overstate contribution margin and understate your true break-even point.
How do I use break-even analysis for a new UK business?
Start by listing all fixed costs for the first 12 months — remember to include employer's National Insurance contributions (15% on earnings above £5,000 per year per employee from April 2025) and any business rates liability. Then stress-test your selling price by checking whether your break-even volume is achievable given realistic demand in your target market.
How does break-even analysis help with pricing decisions?
Break-even analysis shows the minimum volume you must sell at a given price to cover costs. If raising your price by 10% means you can break even selling 15% fewer units, you can accept some volume loss from the price increase and still be more profitable. Conversely, if a price cut requires a large volume increase to maintain the same profit, the cut may not be worthwhile. Break-even is the foundation for any pricing sensitivity analysis.
What is the difference between fixed and variable costs?
Fixed costs do not change with production or sales volume — rent, salaries, insurance, and loan repayments are fixed whether you sell 100 or 1,000 units. Variable costs increase directly with output — raw materials, packaging, sales commission, and delivery. Semi-variable costs have a fixed element and a variable element — for example, a phone contract with a base charge plus per-minute charges. Correctly classifying costs is essential for accurate break-even and profitability analysis.
How does break-even change if I add a new product?
Adding a new product adds both fixed costs (development, tooling, marketing) and variable costs (materials, manufacturing). If fixed costs rise, the break-even point for the whole business increases. The new product must generate enough contribution (selling price minus variable cost) to cover the additional fixed costs and contribute to overall profitability. Multi-product break-even is more complex and requires assumptions about the sales mix between products.
Can break-even analysis account for taxes?
Standard break-even analysis calculates the point at which revenue covers costs before tax. A post-tax break-even includes the tax burden in the required profit — for example, if you need £30,000 net profit and pay 25% corporation tax, you need £40,000 gross profit. Including tax in the target gives a more realistic picture of the cash generation required for the business to sustain itself and service any debt.
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