Sometimes, the most useful metric for your business isn’t profit or growth—it’s the line you have to cross to stop losing money. That threshold is your break-even point, and it’s a number that captures how much revenue (or how many sales) you need to fully cover your costs. Every dollar before that line pays for staying afloat, while every dollar after can help you build.

Below, we’ll explain how to calculate the break-even point, how to adapt it for different products and timelines, and how to put it to work in Excel or in day-to-day decision-making.

What’s in this article?

• What is the break-even point?
  
• What is break-even analysis, and why is it important?
  
• How do you calculate the break-even point?
  
• What’s the break-even point formula?
  
• How do you calculate the break-even point for multiple products?
  
• How do you calculate the monthly and annual break-even points?
  
• How do you calculate the break-even point in Excel?
  

What is the break-even point?

The break-even point is the moment your business stops losing money and can fully cover its costs; it’s the amount of revenue you need to cover all your expenses. You can’t reach profitability without crossing the break-even point first, and knowing where that line sits is a useful benchmark.

For example, if your monthly expenses total $10,000 and each unit sold brings in $50, you need to sell 200 units a month to break even. If you sell fewer than 200, you’re operating at a loss.

This number is used in planning, pricing, forecasting, and investor conversations. If your break-even point is within reach, you’re on solid ground. If it isn’t, something in your business model might need to change.

What is break-even analysis, and why is it important?

Analyzing your break-even point lets you figure out the minimum performance level your business needs to meet to avoid losing money. This process helps you calculate the exact point where your revenue matches your total costs. Here’s how break-even analysis can help you better assess how your business works:

Pressure-testing your pricing

Break-even analysis helps you understand what your pricing needs to accomplish.

Say you’re considering lowering prices to drive volume. Though that might work, what’s the new sales volume you’d need to reach the break-even point at that lower price? If the answer is unrealistic, a break-even analysis will catch that before it turns into a financial problem.

The analysis also tells you whether your pricing supports the business model. If you’re selling something for $25 but need $60 of revenue per unit to break even, you’re not underperforming—your product or service is mispriced.

Getting an honest view of your costs

To accurately calculate the break-even point, you have to list all your costs: fixed, variable, recurring, and one-off. That process forces some financial accountability by surfacing small expenses that might otherwise be hiding in the margins.

If your break-even calculation returns a number that seems way off, that’s often a sign something is missing or miscategorized.

Setting realistic sales targets

Once you know your break-even point, you know the minimum your business needs to sell (monthly, quarterly, or annually) to stay viable.

That doesn’t mean every month has to beat that point, but it becomes your baseline. If you’re consistently operating below the break-even point, you’re burning through cash. If you’re comfortably above it, you’re generating profit and building in margin for error.

Modeling risk and resilience

Break-even analysis provides a framework for stress testing and lets you ask questions such as:

• What happens to our break-even point if material costs increase by 15%?
  
• If we open a second location and our fixed costs double, how much more do we need to sell?
  
• If we switch to a subscription model, how many paying customers do we need each month to stay cash flow neutral?
  

With a working model, you can plug in real variables and see how durable your business is when circumstances change.

Understanding your margin of safety

Break-even analysis helps define your margin of safety, the buffer between your sales and your break-even point. The larger that buffer, the more resilient your business is to volatility. The smaller it is, the more exposed you are to disruptions.

Making more objective decisions

Key decisions, such as hiring, pricing changes, new product lines, and expansion, affect your cost structure and revenue potential. Break-even analysis gives you a way to evaluate those choices.

If a new initiative would raise your fixed costs, you can quickly calculate how much more revenue you’d need to justify the expansion. If you’re launching a lower-margin product, you can forecast the sales volume required for it to break even on its own.

Meeting financial expectations

If you’re raising capital or applying for financing, you’ll almost certainly be asked about your break-even point. It shows you understand the economics of your business and you have a credible plan to stop burning cash and start generating returns. A well-structured break-even analysis also builds confidence in your financial judgment.

How do you calculate the break-even point?

To find your break-even point, start with three numbers:

• Your fixed costs
  
• Your variable cost per unit
  
• Your selling price per unit
  

After you have these figures, follow the instructions below.

Add up your fixed costs

These are the expenses you pay no matter how much (or how little) you sell, including rent, salaries, software subscriptions, insurance, and equipment leases. These costs stay the same each month.

Determine your variable cost per unit

These are the costs that increase with each sale: raw materials, packaging, shipping, fulfillment labor, and payment processing fees. If it costs you $5 to produce, package, and ship each unit, that’s your variable cost per unit.

Include payment processing fees in your variable costs. Stripe shows per-transaction fees in your Dashboard, so they’re easy to factor in as part of your variable costs.

Know your selling price

This is how much you charge for one unit of your product or service.

Remember that all numbers need to be based on the same time period. If you’re using monthly fixed costs, the break-even point you calculate will be a monthly figure. If you’re using annual fixed costs, the break-even point will be on an annual basis. If your contribution margin seems surprisingly low or high, double-check your numbers. The problem is often missing costs or an incorrect pricing assumption.

What’s the break-even point formula?

Once you’ve identified your fixed costs, variable costs, and selling price, you can calculate your break-even point two ways: as a number of units you need to sell and as an amount of revenue you need to generate. Here’s how to calculate with each method:

Break-even point in units

This metric tells you how many units you need to sell to fully cover your fixed and variable costs.

Here’s the formula:

Break-even Point (Units) = Fixed Costs / (Selling Price Per Unit – Variable Cost Per Unit)

It can also be written as:

Break-even Point (Units) = Fixed Costs / Contribution Margin

Your contribution margin is the selling price per unit minus the variable cost per unit.

Example:

• Fixed costs: $15,000
  
• Price per unit: $50
  
• Variable cost per unit: $5
  
• Contribution margin: $45
  

Break-even point (units) = $15,000 / $45 = 333.33 units

At 334 units sold (rounding up) each month, you can cover your $15,000 in fixed costs. Profit is essentially zero (give or take with rounding). If you sell 335 units, that extra $45 is profit.

Break-even point in revenue

If you want to find your break-even point in dollars instead of units, use the break-even point formula for revenue.

Here’s the formula:

Break-even Point (Revenue) = Fixed Costs / Contribution Margin Ratio

To find the contribution margin ratio, divide your contribution margin by your selling price per unit.

• In our above example: $45 / $50 = 0.9 (or 90%)
  
• Break-even point (revenue) = $15,000 / 0.9 = $16,666.67
  

That’s the minimum sales revenue you need to generate in that period to break even.

Both formulas come from the same logic. One gives you a sales quantity target, while the other gives you a dollar figure. Use whichever helps you plan more clearly, and revisit it as costs change or pricing is adjusted.

How do you calculate the break-even point for multiple products?

When you’re selling more than one product or service, calculating your break-even point isn’t as straightforward as it is for a single product. Each item likely has its own price, cost, and margin, so you can’t plug only one number into the formula.

Instead, you’ll need to account for your product mix using weighted averages. Let’s look at how that’s done.

Define your sales mix

Start by identifying the percentage of total unit sales each product represents. For example:

• Product A = 50%
  
• Product B = 30%
  
• Product C = 20%
  

These percentages should reflect your expected or historical averages.

Calculate the weighted average price and variable cost

Using your sales mix, calculate a blended price and blended variable cost per unit.

For example:

• Product A: $100 price, $60 variable cost
  
• Product B: $50 price, $30 variable cost
  
• Product C: $30 price, $15 variable cost
  

In this scenario, the weighted average price would be:

(0.5 × $100) + (0.3 × $50) + (0.2 × $30) = $50 + $15 + $6 = $71

The weighted average variable cost would be:

(0.5 × $60) + (0.3 × $30) + (0.2 × $15) = $30 + $9 + $3 = $42

Find the weighted average contribution margin

Formula: Weighted Average Contribution Margin = Weighted Average Price – Weighted Average Variable Cost

Using our previous example, this would be:

$71 – $42 = $29 per unit

Calculate total break-even units

Formula: Break-even Point (Units) = Fixed Costs / Weighted Average Contribution Margin

If your fixed costs are $58,000, that means:

$58,000 / $29 = 2,000 units

Allocate break-even units by product

Multiply the total break-even units by each product’s sales mix to see how many of each you’d need to sell:

• Product A: 2,000 × 50% = 1,000 units
  
• Product B: 2,000 × 30% = 600 units
  
• Product C: 2,000 × 20% = 400 units
  

Your break-even target is about a balanced mix of sales. If you sell more of your higher-margin products, you’ll break even faster. If your sales shift toward lower-margin items, your overall break-even point increases.

How do you calculate the monthly and annual break-even points?

The break-even formula doesn’t change based on time period, but the numbers you use do. Whether you’re looking at break-even point on a monthly or annual basis depends on how you’re planning and what kind of visibility you need. Here’s how to calculate each:

Monthly break-even point

Your monthly break-even point helps you:

• Track performance in real time
  
• Identify which months are profitable
  
• Set monthly budgets
  

To calculate it, use your monthly fixed costs and sales figures to get a short-term view of what you need to stay afloat each month.

For example:

• Monthly fixed costs = $12,000
  
• Contribution margin per unit = $40
  
• Break-even units per month = $12,000 / $40 = 300 units
  

Annual break-even point

Your annual break-even point helps you with:

• Planning or fundraising
  
• The big-picture view of your business’s health over the year
  
• Evening out month-to-month swings in seasonal businesses
  

Use your annual numbers to take the long view with total fixed costs for the year.

For example:

• Annual fixed costs = $144,000
  
• Contribution margin per unit = $40
  
• Break-even units per year = $144,000 / $40 = 3,600
  

A business might break even in a year but still lose money in some months, especially if it’s seasonal. Knowing your monthly break-even point helps you plan for those lean months and ensure you’ve got enough support or cash flow to cover gaps. Conversely, some businesses use the annual break-even point to determine how many sales they must have to cover a full year’s expenses.

If you’re using Stripe for payments, you can pull monthly or annual revenue reports from your Dashboard. That makes it easier to compare your performance with your break-even revenue target over different time frames and course-correct as needed.

How do you calculate the break-even point in Excel?

Excel and Google Sheets are ideal for building break-even models. You can keep it simple or add more complexity. Once the model is set up, you can use it to test different scenarios in seconds. Here are a few ways to run break-even calculations in a spreadsheet:

Set up the calculations

Create rows for:

• Price per unit
  
• Variable cost per unit
  
• Fixed costs
  

Input your figures. Then, using the cells for the variables you need, write out a calculation in a new cell. For example, if price per unit is in cell B1 and variable cost per unit is in cell B2:

• Contribution Margin = Price Per Unit - Variable Cost Per Unit
  
• Contribution Margin = B1 - B2
  

If fixed costs is in cell B4 and you calculated the contribution margin in B3, you would do the following to calculate the break-even point in units:

• Break-even Point (Units) = Fixed Costs / Contribution Margin
  
• Break-even Point (Units) = B4 / B3
  

As you get comfortable doing calculations in Excel or Google Sheets, you can make these calculations in a spreadsheet that’s already calculating your fixed costs and other variables. But this is the basic formula you’ll need to get started.

Use Goal Seek to solve for the break-even point

If you already have a spreadsheet with your current cost and revenue calculations, you can use Excel’s Goal Seek tool to find your break-even point. Follow these steps:

• Go to the “Data” tab.
  
• Click on “What-If Analysis.”
  
• Click on “Goal Seek.”
  
• Set the “Set cell” field to the cell that contains your profit/loss calculation.
  
• Set your desired value for the profit/loss cell to zero.
  
• In the “By changing cell” field, enter the cell that contains your units sold.
  
• Click “OK.”
  

Excel will automatically find the number of units needed to break even. This works well when the relationship between inputs and outputs isn’t perfectly linear or when you’re building a more complicated model.

Spreadsheets work well for the break-even point because you can update inputs as your business evolves, easily model multiple products, time frames, or pricing strategies, and use Excel’s built-in charting to visualize your break-even threshold over time.