Break-Even Analysis for Small Businesses
Break-even analysis estimates the sales level at which revenue covers fixed and variable costs, before profit.
The basic formula
Break-even units = Fixed costs ÷ (Selling price per unit − Variable cost per unit)
A simple example
With fixed costs of $3,000, a $50 selling price and $20 variable cost, contribution is $30 per unit. Break-even is 100 units.
Practical tips
Use consistent time periods for costs and sales. This simplified formula assumes a stable selling price and variable cost; multiple products require a weighted contribution margin.
Put it into practice
Use the free SoloBizKit calculators to test your assumptions and compare different scenarios. Keep your inputs and assumptions up to date as your business changes.
This guide is for general educational purposes only and is not financial, legal, accounting or tax advice. Rules and circumstances vary by location.