Break-Even Calculator

A break-even calculator tells you how much you have to sell before you stop losing money. It separates costs into two kinds: fixed costs that you pay regardless of activity, and variable costs that rise with every unit, job or hour you deliver. The gap between your price and your variable cost is what pays down the fixed costs, and break-even is the point where it has paid them all.

• Contribution per unit is the sale price per unit minus the variable cost per unit.
• Break-even in units is total fixed costs divided by that contribution.
• Break-even revenue is the break-even units multiplied by the sale price.
• If the contribution is zero or negative there is no break-even point, because every extra sale increases the loss.

1. Enter your fixed costs for the period: rent, salaries, insurance, vehicles, software and finance.
2. Enter the price you charge per unit, where a unit might be a job, a visit, a product or a billable day.
3. Enter the variable cost of delivering one unit.
4. Read the contribution, the break-even volume and the revenue required.

A small maintenance firm carries 30,000 of fixed costs a quarter, charges 250 per job and spends 150 per job on labour and materials.

• Contribution per job: 250 - 150 = 100.
• Break-even volume: 30,000 / 100 = 300 jobs.
• Break-even revenue: 300 x 250 = 75,000.

The firm needs 300 jobs in the quarter to cover its fixed costs. Job 301 is the first one that contributes 100 of profit.

The contribution figure is the number to watch. A small increase in price or a small cut in variable cost moves break-even a long way, because both act directly on the contribution. If the break-even volume looks unreachable in the time available, the answer is usually to raise the price, reduce the fixed cost base, or decline the work, rather than to hope for volume that is not there.

Public contracts are often multi-year and volume-based, so a thin contribution locked into a framework compounds over the term. Running a break-even check on the volumes stated in the tender documents, and again on a pessimistic volume, shows whether the contract is worth having at the price you were planning to submit.

What counts as a fixed cost?

Anything you pay whether or not you trade: rent, permanent salaries, insurance, vehicle leases, software and loan repayments.

What is contribution margin?

The sale price of one unit minus the variable cost of delivering it. It is what each sale contributes towards fixed costs and then profit.

Why does it say I cannot break even?

Because your variable cost per unit is the same as or higher than your price, so contribution is zero or negative. Raise the price or reduce the unit cost.

Can I use this for a single contract?

Yes. Use the fixed costs attributable to that contract, such as mobilisation, dedicated staff and equipment, and treat each job or visit as a unit.