Free Breakeven Calculator

A breakeven calculator is a tool used by businesses to determine the point at which their total revenue matches their total costs, resulting in neither profit nor loss. By inputting key variables such as fixed costs, variable costs, and selling price, the calculator swiftly provides a breakeven point in terms of units sold or revenue generated

Breakeven Calculator

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Calculate Your Breakeven Point: An Essential Tool for Small Businesses

As a small business owner, calculating your breakeven point is a key step in making smart financial decisions and setting your company up for success. This metric shows the number of units you need to sell just to cover your costs before earning a profit. Understanding your breakeven point provides valuable insights to guide your marketing, operations, and growth strategies.

What is the Breakeven Point and Why Does it Matter?

The breakeven point is the point where your total revenues equal your total expenses. At this juncture, you are not making or losing money. Calculating this helps you:

Set realistic sales and revenue goals to start profiting
Make informed decisions about pricing and costs
Gauge the profitability of new products or services
Assess if your business model is economically viable

Knowing your breakeven point provides clarity on what it will take to turn a profit. This equips you to make strategic choices that move your business towards sustainable growth.

How to Calculate Your Breakeven Point

The formula to calculate breakeven is straightforward:

Breakeven Point = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

Where:

Fixed costs are expenses that don’t change based on production volume (e.g. rent, insurance, loan payments)
Variable costs vary with production volume (e.g. materials, shipping, commissions)
Selling price per unit is the price you charge customers

For example, if your fixed costs are $5,000 per month, you sell your product for $25 per unit, and the variable cost per unit is $15, then:

Breakeven Point = $5,000 / ($25 - $15) = 1,000 units

You need to sell 1,000 units monthly to cover your fixed and variable costs.

Ways to Lower Your Breakeven Point

A lower breakeven point means achieving profitability sooner. Here are some tips:

Negotiate fixed costs like rent, utilities, and insurance
Reduce variable costs through bulk buying, improved efficiency, outsourcing
Minimize waste by optimizing operations and inventory
Diversify offerings to boost revenue with new products or services
Use targeted marketing and SEO to increase sales

Carefully tracking your breakeven point provides insight on how well your cost-cutting and efficiency strategies are working. This helps ensure your business remains profitable over time.

Take Control of Your Finances

Calculating your breakeven point provides knowledge and control over one of the most fundamental aspects of running a successful business. This simple but powerful metric will guide your decisions, helping set your small business up for sustainable growth and profitability.

Ways to use breakeven
Activity	When to use	How to use
Set prices	Determine how much to charge for your products or services	Calculate your breakeven point and then set your prices accordingly. This will help you to make sure that you are covering your costs and making a profit.
Determine profitability	See if your business is making a profit	Calculate your breakeven point and then compare it to your actual sales. This will show you if you are making a profit or not.
Make decisions about marketing and sales	Decide how to allocate your marketing and sales resources	Use breakeven analysis to determine how much you need to sell in order to cover your costs and make a profit. This will help you to make sure that you are allocating your resources in the most effective way.
Monitor your financial performance	Track your costs and sales over time	Use breakeven analysis to track your progress and make sure that you are on track to reach your financial goals.
Make strategic decisions	Decide whether to expand your business or not	Use breakeven analysis to determine how much you need to sell in order to cover your costs and make a profit. This will help you to make sure that you are expanding your business in a sustainable way.

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Contributors

Jordan Motzkin

Entrepreneur, Former Professor, CNN & Fox featured

Jay Friedlander, MBA

Jay Friedlander

Babson Fellow, Professor, and NYT-Featured Entrepreneur

What's a Break-even Analysis?

A break-even analysis is a financial tool used to determine the point at which total revenue equals total costs, helping businesses understand the minimum level of sales needed to avoid losses. It is a guidepost for assessing a business’s financial health and viability.

What are some examples of fixed costs?

Fixed costs generally stay the same month to month — think rent for your primo storefront, insurance payments, and the trusty internet bill keeping you connected. They stay put, unfazed by the ebb and flow of your production.

What are some examples of variable costs?

Variable costs are the chameleons of your business realm, adapting to every sales or production fluctuation. Envision raw materials transforming into products, shipping costs dancing with order volume, and the electricity bill mirroring your business's hustle.

What are some ways to lower fixed costs?

To trim steadfast costs, explore negotiating a better lease, optimize insurance plans without compromising coverage, and embrace technology to streamline administrative expenses. Think of it as rearranging the furniture to enhance your ship's agility.

How can I reduce variable costs?

To minimize changeable costs, delve into bulk material purchasing, streamline production processes for peak efficiency, and negotiate better shipping rates. Imagine fine-tuning your ship's sails to catch the perfect wind and sail smoothly through financial storms.

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