The Most Critical Metric for Startup Survival
Before launching a new product, opening a retail store, or hiring employees, you must know your break-even point. This is the exact sales volume at which your total business revenue equals your total expenses—meaning your net profit is exactly $0.
Knowing this threshold ensures you price your products profitably, manage overhead costs safely, and understand how many sales you must secure to cover costs.
Fixed Costs vs Variable Costs
To perform a break-even calculation, you must divide your expenses into two categories:
- Fixed Costs: Costs that do not change regardless of sales volume (rent, corporate insurance, software subscriptions, salaries).
- Variable Costs: Costs that increase directly as you sell more units (raw materials, packaging, transaction fees, shipping).
Note: Break-even units formula: Break-Even Volume = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit).
Try the Live Break-Even Analysis for Small Business Owners
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