Determine the exact number of units you need to sell to cover all costs
Fixed Costs (Monthly)
Unit Economics
Break-Even Point
0 Units
What is the Break-Even Point?
The Break-Even Point (BEP) is the stage where your total revenue equals your total expenses—meaning your profit is exactly zero. Anything you sell above this volume is pure profit. To calculate this, we use the Contribution Margin (Price minus Variable Cost). The formula is: $$Break\text{-}Even\ Units = \frac{Fixed\ Costs}{Price - Variable\ Cost}$$
[attachment_0](attachment)- Fixed Costs: These are expenses that stay the same regardless of how much you sell (e.g., your office rent).
- Variable Costs: These costs increase with every unit you produce (e.g., raw materials or shipping).
- Safety Margin: Once you know your break-even point, you can calculate how much of a "buffer" you have before the business starts losing money.
How can I lower my break-even point? +
You can lower it by either reducing your fixed costs (moving to a cheaper office), reducing variable costs (finding a cheaper supplier), or increasing your selling price.
Why is my break-even point so high? +
This usually happens if your "Contribution Margin" is too thin. If you sell a product for $10 but it costs you $9 to make, you only keep $1 to pay off your rent. You need to sell a massive volume to survive.
Does this include taxes? +
Typically, break-even analysis is done "Pre-Tax." However, if you want a truly accurate number, you should include any fixed tax obligations in your fixed costs.
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