How much do you have to sell to keep the lights on?

The one chart every business stands on

Every business has two kinds of cost pulling in different directions: the fixed ones that arrive whether or not anything sells, and the variable ones that ride along with each sale. Break-even is where the sales volume finally carries both — the month's contributions have paid the rent, the salaries and the software, and the next sale is the first one that is actually profit. Knowing the number changes decisions all day: it is the floor under a pricing debate, the sales target that is not aspirational but existential, and the first thing to recompute before signing a lease that moves the fixed line.

How the number is computed

Each unit sold contributes its price minus its own variable cost — the contribution margin. Break-even units = fixed costs ÷ contribution margin per unit; break-even revenue is the same threshold in dollars, and the margin percentage states how much of every sales dollar survives to fight the fixed costs. On the defaults above, a $45 unit costing $19 to deliver contributes $26, so $18,000 of monthly fixed costs breaks even at 693 units — the arithmetic says 692.3, and since a fraction of a sale cannot be made, the honest unit count rounds up while the revenue figure stays exact. Everything here is monthly; run it annually by entering annual fixed costs instead, and the units come back annual too.

Using it as a lever board

The formula has three inputs and each is a different lever. Raising the price drops the break-even fastest — a $2 increase on the default cuts roughly fifty units off the month — but meets the market's resistance. Cutting variable cost does the same work quietly, in supplier terms and process. Cutting fixed costs lowers the bar itself, which is why the lease and the payroll are the two numbers worth negotiating hardest. The margin of safety — how far current sales run above break-even — is the resilience read: a business selling 900 units against a 693 break-even can absorb a 23% slump before losing money; one selling 720 cannot absorb an ordinary February. For a service business the same board works in hours, and adds a constraint: if break-even needs more hours than the team can bill, no amount of selling fixes it — the price is wrong.

Common mistakes

Misclassifying costs is the usual one, and it flatters the answer in both directions: salaried staff treated as variable understates the fixed bar, while per-job labor buried in overhead overstates the margin. Forgetting the quiet variable costs — card fees, shipping, spoilage, the free extras — inflates the contribution by a few points that compound over hundreds of units. Using average revenue per sale across wildly different products hides the fact that each line has its own break-even; run the calculator per product line when the margins diverge. And a price at or below variable cost has no break-even at all — every sale digs the hole deeper, which this page says plainly rather than reporting an infinite volume with a straight face.

Break-even frames the operating month; the longer game is what the business earns its owner across the year — the SDE calculator computes that figure the way buyers and lenders read it. And owner-operators holding property alongside the company can keep the building's side lender-ready with the free Schedule of Real Estate Owned generator.