How to find your break-even point (in plain English)

By Gino DiPierro, 2026-10-08

Your break-even point is how much you need to sell each month just to cover your costs. Below it, you're losing money. Above it, you're making a profit. Every owner should know this number by heart.

Step 1: Add up your fixed costs

Fixed costs stay about the same every month whether you sell a lot or a little: rent, insurance, software, loan payments, phone, and your own steady paycheck. Add them up for one month.

Step 2: Find your margin on each sale

For each sale, what does it cost you to deliver? Materials, product cost, card fees, commissions. Subtract that from your price. What's left is your contribution to covering fixed costs. As a percent, that's your contribution margin.

Step 3: Divide

Break-even sales = fixed costs ÷ contribution margin.

Example: fixed costs are $8,000 a month and your margin is 40%. $8,000 ÷ 0.40 = $20,000. You need $20,000 in sales each month to break even.

What to do with the number

• If you're regularly below it, you have a pricing, cost or sales problem, and now you know how big it is
• If you're just above it, one slow month can hurt, so build a cushion
• If you're well above it, decide on purpose where the profit goes: taxes, cushion, debt payoff, your raise

Try the free break-even calculator on this site to find yours.