What Is Break-Even Point?
The break-even point is the level of sales where your total revenue is exactly equal to your total costs.
At this point:
your business is not making a profit
your business is not making a loss
every sale above the break-even point starts contributing toward profit
Break-even analysis is useful because it helps you understand how many units you need to sell, or how much revenue you need to generate, before your business becomes profitable.
By ToolNestPro | Updated September 2026
How to Calculate Break-Even Point: A Simple Step-by-Step Guide
Knowing your break-even point helps you understand how much you need to sell before your business begins making a profit.
At the break-even point, your total revenue is exactly equal to your total costs. You are not making a profit yet, but you are no longer making a loss.
In this guide, you’ll learn how to calculate your break-even point, understand the formula, see a simple example, and use the result to make better pricing and sales decisions.
How to Calculate Break-Even Point
The basic break-even formula is:
Break-Even Point (Units) = Fixed Costs ÷ (Selling Price per Unit − Variable Cost per Unit)
The amount in brackets is called the contribution per unit.
For example, if:
Fixed costs = £2,000
Selling price per unit = £50
Variable cost per unit = £30
Then:
£2,000 ÷ (£50 − £30) = 100 units
This means the business needs to sell 100 units to break even.
After the 100th unit, additional sales begin contributing toward profit.
How to Interpret Your Break-Even Point
Your break-even point tells you the minimum level of sales needed to cover all your costs.
If your sales are:
below the break-even point, the business is making a loss
at the break-even point, the business is covering its costs
above the break-even point, the business is beginning to make a profit
For example, if your break-even point is 100 units and you sell 120 units, the extra 20 units are contributing toward profit after your fixed and variable costs are covered.
Knowing your break-even point can also help with pricing, sales targets and deciding whether your current cost structure is sustainable.
Common Break-Even Calculation Mistakes
A break-even calculation can be useful, but the result will only be as accurate as the numbers you use.
Common mistakes include:
forgetting some fixed costs
using the wrong variable cost per unit
confusing markup with profit
changing the selling price without updating the calculation
assuming all products have the same costs and margins
ignoring changes in costs over time
For example, if material or delivery costs increase but you keep using the old variable cost figure, your break-even point may be too low.
It is a good idea to review your break-even calculation whenever your prices, costs or business expenses change.
Want to quickly work out how many units you need to sell before your business starts making a profit?
Use our free Break-Even Calculator to calculate your break-even point using your fixed costs, selling price and variable costs.
Frequently Asked Questions
What is the break-even point in simple terms?
The break-even point is the level of sales where your total revenue exactly covers your total costs, so the business is making neither a profit nor a loss.
Why is break-even analysis important?
It helps you understand the minimum sales level needed to cover costs and can support pricing, budgeting and sales planning.
Does the break-even point stay the same?
No. It can change if your selling price, fixed costs or variable costs change.