Break-Even Analysis Calculator

Margin of safety is the number to watch.

Margin of safety is the number to watch. Margin of safety is how far sales can fall before you lose money.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Fixed costs per month

Average selling price

Variable cost per unit

Units sold now

Profit target per month

Break-even units

1,490

$86,364 of revenue

Contribution per unit$25.52

Contribution margin44%

Units for the profit target1,960

Margin of safety6.9%

Margin of safety is how far sales can fall before you lose money, 6.9% here. It is the number worth watching in a downturn, because it converts a revenue forecast directly into a survival question.

How the Break-Even Analysis Calculator works

Margin of safety is how far sales can fall before you lose money. It converts a revenue forecast directly into a survival question, which makes it the number worth watching when conditions turn.

Also known as: break even point calculator · when do I start making money · fixed costs divided by contribution

Contribution margin, which is where it starts

Break-even is fixed costs divided by contribution per unit. Contribution is selling price minus variable costs, and getting the variable list right is the whole exercise.

Variable costs are the ones that occur because a unit sold: cost of goods, payment processing, marketplace fees, outbound shipping, packaging, pick and pack labour if it is genuinely variable, and the returns cost attributable to that unit.

Fixed costs are the ones that occur whether or not you sell anything: rent, salaries, software, insurance, accountancy. The line between them is less obvious than it looks. Warehouse labour is fixed in the short run and variable over a quarter. Advertising is discretionary rather than either, and putting it in the wrong bucket produces a break-even figure that does not describe any real situation.

Where the number moves fastest

Break-even is highly sensitive to contribution margin and only linearly sensitive to fixed costs, which is not intuitive.

Work it. Fixed costs of £8,000 a month with £6 contribution per unit needs 1,334 units. Raise contribution to £7 by cutting £1 of variable cost and it drops to 1,143 units, a 14% reduction. Cut fixed costs by £1,000 instead and it drops to 1,167, a 12% reduction.

A pound off the unit cost did more than a thousand pounds off the monthly overhead. That ratio holds generally, and it is the reason supplier negotiation and packaging efficiency deserve more attention than they usually get relative to overhead cutting, which feels more decisive and moves the number less.

Break-even with a mixed catalogue

Single-product break-even is a textbook exercise. Real catalogues have hundreds of products at different margins, and the break-even volume depends on which ones sell.

The workable approach is a weighted average contribution margin, using the actual sales mix. That gives a break-even in revenue rather than units: fixed costs divided by contribution margin percentage.

The caveat is that mix moves. A month where the low-margin lines outsell the high-margin ones has a higher break-even than the average suggests, and a promotion on a low-margin product shifts mix in exactly that direction. Which is why break-even revenue should be recalculated when the mix changes materially, rather than set once and referred to for a year.

Cash break-even, which comes later

Accounting break-even is where profit reaches zero. Cash break-even is where the bank balance stops falling, and it is a higher number for any business holding stock.

The difference is inventory growth, loan principal repayments and tax. A business at accounting break-even that is growing still consumes cash to fund the additional stock, so it needs to be past accounting break-even before the balance stabilises.

For a business with a 60 day inventory cycle growing at 20% a year, cash break-even can sit 10% to 15% above accounting break-even. Founders who hit their break-even target and find the bank balance still falling are usually looking at exactly this, and the answer is not that the calculation was wrong but that it was answering a different question.

Margin of safety

Margin of safety is current sales minus break-even sales, expressed as a percentage of current sales. It answers how far revenue can fall before losses start.

A business at £60,000 monthly with a £45,000 break-even has a 25% margin of safety. That is the buffer against a bad month, a seasonal dip, or an advertising channel that stops working.

It is worth tracking over time because it moves in ways the profit figure hides. A business adding fixed costs while revenue grows can have rising profit and a falling margin of safety, which means it is becoming more profitable and more fragile simultaneously. That is the pattern that ends businesses in a downturn, and the profit line gives no warning of it.

Where to go next

The Break-Even Analysis question rarely arrives on its own. These are the ones that usually come with it:

Break-Even Timeline Calculator — Two break-evens, months apart.
Fixed vs Variable Cost Calculator — Operating leverage cuts both ways.
Gross Profit Margin Calculator — Revenue minus cost of goods, as a percentage.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

How do I calculate break-even?

Fixed costs divided by contribution per unit. Contribution is price less every cost that varies with volume.

What is margin of safety?

The gap between current sales and break-even, as a percentage of current sales. At 40%, sales could fall by two fifths before you lose money.

What belongs in fixed costs?

Anything that does not vary with volume in the relevant range: rent, salaries, software, insurance. Costs that step up at higher volumes are fixed within a band and should be modelled per band.