Break-Even Calculator: Find Your Monthly Break-Even Point

What is a break-even point?

Your break-even point is the sales level where you stop losing money and have not yet started making any. Total revenue equals total cost. Profit is exactly zero.

The US Small Business Administration defines it the same way and treats it as a standard part of any business plan, because a lender or investor wants to know when they will see their money back (SBA, Business Guide, updated October 3, 2024).

Two versions are useful. Break-even in units tells you how many things you need to sell. Break-even in revenue tells you what has to hit the bank account. Most owners find the dollar figure more useful day to day, because you can compare it against last month without doing any counting.

One number does most of the work here: your contribution margin. That is what you keep from a sale after the costs that only exist because the sale happened.

How do you calculate your break-even point?

Divide your fixed costs by your contribution margin.

Say you pay $8,000 a month in rent, insurance, software and your own salary. You sell a product for $45 that costs you $18 in materials, packaging and payment fees. Your contribution margin is $27 per unit, or 60% of the price.

$8,000 divided by $27 is 296.3, so you need 297 units to break even. In revenue terms, $8,000 divided by 0.60 is $13,333 a month.

Sell 500 units and you clear $5,500 in profit. Sell 200 and you lose $2,600.

The formula does not care how big or small your business is. A food truck and a software company run the same arithmetic. What changes is which costs land in which bucket, and that is where the answer gets away from people.

What counts as a fixed cost and what counts as variable?

A fixed cost is one you pay in a month where you sell nothing. Rent. Insurance. Salaried staff. Software subscriptions. Your loan payment. A variable cost only exists because a sale happened: materials, shipping, sales commission, and the card processing fee of roughly 2.6% to 3.5% that almost everyone leaves out.

Payroll is where people slip. A salaried manager is a fixed cost. An hourly crew you only call in when a job books is variable.

Packaging is the other one, and I learned it the expensive way. At Craftan, our pottery business, I had the product cost worked out and had barely thought about getting a fragile piece through a courier. Every order needed a sturdy box, bubble wrap, tape, packing paper stuffed inside the pieces and around them to fill gaps, and fragile stickers. None of it was in my first margin calculation. All of it scales with every order.

What is a good contribution margin for a small business?

There is no universal answer, and any site giving you one is guessing. A 15% margin is comfortable for a contractor turning over $2 million and fatal for a shop paying $6,000 in rent.

For a reference point, US public companies outside financial services average a 34.4% gross margin, and the spread by sector is enormous: 15.5% in engineering and construction, 32.2% in restaurants, 33.2% in general retail, 71.7% in software (NYU Stern, Margins by Sector, January 2026, 4,822 firms).

Read those as a floor rather than a target. Gross margin subtracts cost of goods sold, which for a large company usually absorbs some fixed overhead too. Your contribution margin only subtracts what genuinely rises per sale, so it should come out higher. If you land above your sector's number, that is normal and not a sign you have made an error.

Should you raise prices or cut costs to break even sooner?

Raise prices, if your customers will stay. This is not a preference, it is arithmetic.

A 1% price increase always cuts your break-even by more than 1%. A 1% cut in fixed costs moves it by exactly 1%. A 1% cut in variable costs moves it by less than 1%. That holds for every business that has any variable cost at all.

Run it on the example above. A 5% price rise, from $45 to $47.25, drops break-even from 297 units to 274, a 7.7% improvement. A 10% cut in fixed costs, finding $800 a month to remove, only gets you to 267 units, a 10% improvement. Half the change, three quarters of the result.

The catch is real though. Rent does not walk out when you cut it. Customers might, when you raise the price. The math ranks the levers and says nothing about whether your buyers will tolerate the top one.

How long should it take a new business to break even?

Longer than the internet tells you, and the failure story you have heard is wrong.

Roughly 79 of every 100 new US establishments are still operating after one year. About 49 make it to year five, and about 34 reach year ten (US Bureau of Labor Statistics, Business Employment Dynamics, through March 2025). The BLS also reports that 34.7% of establishments born in 2013 were still running in 2023.

The popular claim that 90% of businesses fail in the first year appears in no federal dataset. It is folklore.

What that means for break-even is that you should plan for a slow grind rather than a cliff. Businesses do not usually die in month three from a bad month. They erode over years when the monthly number sits just under break-even and the owner keeps hoping. Knowing your break-even figure is what turns that hope into a decision.

How this calculator works

Break-even is one division problem. You take what you pay every month no matter what, and you divide it by what you keep from each sale.

The formula is the one the SBA publishes: fixed costs divided by price minus variable cost gives break-even in units (SBA, Business Guide, updated October 3, 2024). For the dollar version, divide fixed costs by your contribution margin ratio instead.

Break-even revenue is always calculated from the exact unit figure, not the rounded one, so the two results stay consistent.

The calculator runs two modes. Units mode is for anything you can count and price individually. Revenue mode is for services and blended revenue, where one unit does not mean much, and it works from your average contribution margin instead.

What we compare you against, and what we do not

We compare your contribution margin ratio to your sector, using public-company margin data from NYU Stern (Aswath Damodaran, Margins by Sector, January 2026).

That comparison has a caveat that runs in one direction. The published figure is a gross margin, and gross margin is the bigger subtraction. So the sector number is a floor, not a target. The gap is small in retail, where cost of goods really is just what you paid for the stock. It is large in professional services, where salaried staff sit inside cost of goods sold but cost you nothing extra on the next project.

For four of the seven business types, we do not fill in a starting number at all. Home-based services, professional services, field services and e-commerce vary so much by staffing and category that a plausible-looking default would mislead more people than it helped. You get guidance on what to count instead.

We do not benchmark your break-even point itself, because no honest benchmark exists. Two cleaning companies with identical margins break even at completely different revenue if one rents an office and one works from a spare room. Any site showing you an average break-even point for your industry invented it.

What this does not cover

This is a single-product, single-margin model, which is how the SBA's own version works. If you sell a $4 coffee and a $12 sandwich at different margins, run them separately, or use revenue mode with a blended figure and treat the answer as rough.

It also assumes costs move in straight lines. Real ones do not. Buy in bulk and your unit cost drops. Add a second van and fixed costs jump in a step. Break-even is a planning floor, not a forecast.

Figures are in US dollars and the cost examples assume US fees and taxes.

Sources

• Aswath Damodaran, NYU Stern School of Business. Margins by Sector (US), January 2026. pages.stern.nyu.edu
• US Small Business Administration. Break-even point, Business Guide, last updated October 3, 2024. sba.gov
• US Bureau of Labor Statistics. Business Employment Dynamics, establishment age and survival data, through March 2025. bls.gov
• US Bureau of Labor Statistics, The Economics Daily. 34.7 percent of business establishments born in 2013 were still operating in 2023, January 12, 2024. bls.gov