The break-even point shows the sales volume or revenue at which income exactly covers all costs. At this point profit is zero: below it you make a loss, above it you start making a profit. For freelancers and small businesses, the break-even calculation is a practical tool for pricing, sales planning and investment decisions.
In short: you calculate the break-even point with the formula fixed costs ÷ (selling price − variable costs per unit). The result is the number of units from which you make a profit.
What does break-even mean?
Put simply, at the break-even point: revenue = total costs. The variable costs of the units sold are paid, and the sum of the contribution margins fully covers the fixed costs.
The figure answers questions like these:
- How many units do I have to sell at least so that I don't make a loss?
- What revenue do I need to cover my costs?
- How does the break-even point change when prices or costs go up?
- What minimum price do I need for a planned sales volume?
Which figures do you need?
Three figures are enough for a simple break-even calculation:
- Fixed costs: costs that don't depend directly on sales volume within the period you look at, for example rent, base fees or certain salaries.
- Variable costs per unit: costs that come with every additional unit, for example materials, packaging or volume-based fees.
- Selling price per unit: the price you use in your calculation.
It is important that all figures refer to the same period and the same price basis.
Break-even formula for units
First you calculate the contribution margin per unit:
Contribution margin per unit = selling price − variable costs per unit
Then comes the break-even point:
Break-even quantity = fixed costs ÷ contribution margin per unit
If you can only sell whole units, a result with decimals has to be rounded up to the next whole unit.
Example: calculating break-even step by step
A business has monthly fixed costs of EUR 4,800. A product sells for EUR 120. Variable costs are EUR 45 per unit.
- Contribution margin per unit: EUR 120 − EUR 45 = EUR 75
- Break-even quantity: EUR 4,800 ÷ EUR 75 = 64 units
- Break-even revenue: 64 × EUR 120 = EUR 7,680
With 64 units sold, the assumed total costs are exactly covered. Only above this volume does a positive profit arise under these assumptions.
Calculating break-even revenue
If you want to look at the required revenue directly instead of units, you can work with the contribution margin ratio:
Contribution margin ratio = contribution margin per unit ÷ selling price
In the example it is EUR 75 ÷ EUR 120 = 62.5%.
Break-even revenue = fixed costs ÷ contribution margin ratio
This gives: EUR 4,800 ÷ 0.625 = EUR 7,680.
Break-even with a target profit
The plain break-even point only tells you when you stop making a loss. For business planning it is often more important to know what volume you need for a desired profit.
Required quantity = (fixed costs + target profit) ÷ contribution margin per unit
With a target profit of EUR 3,000, the example gives:
(EUR 4,800 + EUR 3,000) ÷ EUR 75 = 104 units. The matching revenue is 104 × EUR 120 = EUR 12,480.
Minimum price for a planned sales volume
You can also turn the calculation around. If you have a realistic sales volume, you can derive a minimum price that covers your costs:
Minimum price = variable costs per unit + (fixed costs ÷ planned sales volume)
With 80 planned units and the figures from the example:
EUR 45 + (EUR 4,800 ÷ 80) = EUR 105.
This value is only the arithmetic cost-recovery limit under the assumptions used. A sensible selling price also has to take into account target profit, market positioning, the risk of price changes and your actual cost structure, among other things.
Break-even for services and freelancers
The method doesn't only work for physical products. For services, the "unit" can be a billable hour, a consulting day or a standardised project. What matters is that price and variable costs refer to the same unit.
For pricing services, the share of time you can realistically bill is also important. Our guide How to calculate your hourly rate as a freelancer shows the calculation from fixed costs, working time and target income.
Common mistakes in break-even calculations
- Confusing revenue with profit: revenue above the break-even point is not all profit.
- Incomplete fixed costs: regular costs or a notional salary for yourself can be missing from the plan.
- Mixing net and gross figures: price and cost basis must be consistent.
- Underestimating variable costs: fees, commissions, packaging, payment or platform costs are easily forgotten.
- Assuming unrealistic sales volumes: a good margin on paper doesn't help if the planned volume can't be reached in practice.
- Calculating only one scenario: prices, costs and sales change. A sensitivity calculation tells you more than a single number.
Better planning: best case, base case and worst case
For more robust planning, compare at least three scenarios. Change the selling price, variable costs and sales volume each time. This shows how sensitive your break-even point is to discounts, cost increases or weaker demand.
A small difference in contribution margin can change the required sales volume considerably. Especially with high fixed costs, this sensitivity matters for decisions.
Calculating break-even faster
If you don't want to work out the figures by hand every time: trade businesses calculate price, margin and earnings per hour in Contractor Studio. If you sell handmade products or on Etsy, Handmade & Etsy Seller Studio shows you the minimum price and the real profit per sale after all fees.
View Contractor StudioView Seller Studio
You'll find more calculation tools under Finance and pricing.
Break-even point FAQ
What is the break-even point, in simple terms?
The break-even point is the profit threshold. There, income is exactly as high as total costs. Profit at that moment is zero.
What is the formula for the break-even point?
Break-even in units = fixed costs ÷ (selling price − variable costs per unit). You get break-even revenue by multiplying this number of units by the selling price.
Can I express break-even as units or as revenue?
Yes. The break-even point can be expressed as the required sales volume or as the required revenue. Which is more useful depends on your business model.
Do fixed and variable costs always stay the same?
No. The simple formula works with assumptions for a certain relevant range and period. In practice, fixed costs can change in steps, and variable costs per unit can rise or fall with volume.
Should VAT or sales tax be included in the break-even calculation?
What matters is a consistent basis. Business calculations often work with net figures when the tax is only passed through. Which treatment is right in your case depends on your tax situation and the model you use.
Sources
The basic formula and explanation were checked against current specialist sources (in German), including Haufe – Break-even-Analyse and Munich Business School – Break-even-Point.
As of October 2026. This article is general business information and is not individual tax, financial or business advice.