Break-Even Calculator
Find the break-even point in units and revenue from fixed costs, price and variable cost, plus the sales needed for a target profit. You can also work out break-even revenue from a margin, or the months until an upfront cost pays back.
Your numbers
For the period you are planning, a month or a year: rent, salaries, software, insurance.
Break-even point in units
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- Break-even revenue
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- Contribution margin per unit
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- Contribution margin ratio
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An estimate from the numbers you typed. It assumes the price, the variable cost per unit and the fixed costs stay the same at every volume. Pre-tax.
The calculation runs in your browser and ParrotNotes does not store your numbers. They sit in the page address so you can bookmark or share the result.
The break-even formula
The break-even point is where total revenue equals total cost: no profit, no loss. In units it is fixed costs ÷ (price − variable cost per unit); in revenue it is fixed costs ÷ the contribution margin ratio.
Say a product line carries $120,000 of fixed costs a year, sells at $400 and costs $250 a unit to make, ship and sell. Each unit leaves $150, which is 37.5% of the price. The line breaks even at $120,000 ÷ $150 = 800 units, or $120,000 ÷ 37.5% = $320,000 of revenue. Open "How it is calculated" under the result to see the same steps with your numbers.
Formulas as the U.S. Small Business Administration: Break-even point page sets them out.
Contribution margin, explained
Fixed costs stay the same whether you sell 10 units or 1,000 over the period: rent, salaries, software, insurance. Variable costs come with each unit: materials, freight, sales commission, card fees. Contribution margin is the price minus the variable cost, the part of each sale that pays down the fixed costs and, past the break-even point, becomes profit.
Gross margin is not quite the same thing. Cost of goods sold often includes fixed production costs such as factory overhead, and leaves out variable selling costs such as commission. If gross margin is the only figure you have, the Break-even revenue mode takes it as a stand-in; treat the answer as rough.
Profit around the break-even point
Past the break-even point every unit adds its contribution margin to profit; below it, every missing unit costs the same. For the example line ($120,000 fixed, $400 price, $250 variable cost):
| Units sold | Revenue | Profit |
|---|---|---|
| 400 | $160,000 | -$60,000 |
| 600 | $240,000 | -$30,000 |
| 800 | $320,000 | $0 |
| 1,000 | $400,000 | $30,000 |
| 1,200 | $480,000 | $60,000 |
What lowers the break-even point
Three levers, in the example: raise the price to $420 and the margin becomes $170, so the break-even point drops to 706 units. Cut the variable cost to $230 and you get the same $170 margin and the same 706 units. Cut the fixed costs to $108,000 and it drops to 720 units.
Discounts pull the other way, and harder than they look. 10% off the $400 price is $40 off a $150 margin: the break-even point climbs from 800 to 1,091 units. That is worth knowing before a rep offers a discount to close.
What the model assumes
A break-even calculation assumes the price, the variable cost per unit and the fixed costs stay the same across the whole range. In practice volume discounts, price breaks, a second shift or a new hire change them in steps, and a product mix has an average margin rather than one. It is also pre-tax. Use it to size the problem and to compare scenarios, then check the numbers that move the answer.
For sales teams
Swap units for deals: the price is the average deal size, the variable cost is what each deal costs to deliver and sell (commission included), and the fixed costs are the team, the tools and the travel for the period. The answer is how many deals the period needs before it makes money, which you can hold up against the pipeline and the win rate.
The Months to break even mode answers the other common question: how long a new rep, a trade show or a new territory takes to pay back what it costs up front.
More for sales leaders and reps: SaaS sales, Industrial sales, Capital equipment sales.
Does the price hold?
The model tells you how many deals you need; the calls tell you whether the price holds. ParrotNotes records sales calls and pulls out objections and next steps.
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