Break-Even Analysis: When Will Your Business Start Making Money?
Published Apr 14, 2026 Β· 6 min read
Every business has a magic number: the point where revenue exactly covers all costs. Below it, you lose money. Above it, you profit. Break-even analysis tells you exactly where that line is.
The Break-Even Formula
Break-Even Units = Fixed Costs Γ· (Selling Price β Variable Cost per Unit)
Example: You sell candles for $25 each. Materials cost $8 per candle. Monthly rent, utilities, and insurance total $2,000.
Break-even = $2,000 Γ· ($25 β $8) = $2,000 Γ· $17 = 118 candles per month
Fixed vs Variable Costs
| Fixed Costs (don't change) | Variable Costs (per unit) |
|---|---|
| Rent / lease | Raw materials |
| Insurance | Packaging |
| Salaries (fixed staff) | Shipping |
| Software subscriptions | Payment processing fees |
| Loan payments | Sales commissions |
Using Break-Even for Decisions
- Pricing: If break-even requires selling 500 units but your market is 200, your price is too low
- New product launch: Calculate how many months to recover development costs
- Hiring: A new employee adds fixed cost β how many extra sales does that require?
- Lease negotiation: Lower rent directly lowers your break-even point
Contribution Margin
The contribution margin ($25 β $8 = $17 per candle) is how much each sale contributes toward covering fixed costs. Higher margins mean a lower break-even point. This is why SaaS businesses (low variable costs) break even faster than manufacturing.
Try it: Use our Break-Even Calculator to find your break-even point instantly.
π Sources: SBA