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Business & Tax
Break-even analysis turns fixed costs and contribution margin into the one revenue figure a business must clear before it earns anything at all.
By FreeCalculators Editorial · Published 2026-09-01 · Updated 2026-09-04 · 4 min read · 943 words
Break-even analysis finds the sales level at which total revenue equals total cost, so profit is exactly zero. The calculation is fixed costs divided by contribution margin — the share of each sales dollar that survives after variable costs. Below that revenue figure the business consumes cash every month; above it, each additional dollar of contribution falls straight to the bottom line.
Two inputs drive everything. Fixed costs are the outflows that do not move with volume: rent, salaries, insurance, software subscriptions, loan interest. Contribution margin is price minus variable cost, expressed as a percentage of price. Variable costs exist only because a sale happened — materials, hourly production labour, shipping, card processing fees, sales commission.
The sensitivity here is one-directional and brutal. Contribution margin sits in the denominator, so a business at 30% margin needs more than twice the revenue of a business at 70% margin to cover the same fixed cost base. That arithmetic is why margin work usually beats cost cutting.
| Contribution margin | Break-even revenue | Revenue for $10,000 profit |
|---|---|---|
| 30% | $83,333 | $116,667 |
| 40% | $62,500 | $87,500 |
| 50% | $50,000 | $70,000 |
| 60% | $41,667 | $58,333 |
| 70% | $35,714 | $50,000 |
Unit break-even divides fixed costs by contribution per unit and answers an operational question: how many covers, jobs, or boxes. Revenue break-even divides by contribution margin percentage and answers a financial one. Single-product businesses should work in units, because units convert directly into staffing and capacity decisions.
Coffee shop break-even (2026)
Monthly fixed costs (rent, salaries, insurance): $18,400 Average ticket: $6.40 Variable cost per ticket (beans, milk, cup, card fee): $2.05 Contribution per ticket: $6.40 - $2.05 = $4.35 Contribution margin: $4.35 / $6.40 = 68.0% Break-even revenue: $18,400 / 0.680 = $27,059 Break-even tickets: $18,400 / $4.35 = 4,230 per month Open 26 days: 4,230 / 26 = 163 tickets per day
The last line is the useful one. A revenue target of $27,059 is abstract; 163 tickets a day is a figure a manager can check against the till at 2pm and act on the same afternoon.
When the break-even figure exceeds realistic capacity, the model rather than the effort level is the problem. Work the levers in order of speed.
Survival data from the Bureau of Labor Statistics (BLS) Business Employment Dynamics series shows roughly one in five new establishments closes within its first year, and about half are gone by year five. The common thread is rarely weak revenue in absolute terms; it is revenue that never crossed a fixed cost base built for a larger business. Running the break-even figure before signing a lease is the cheapest risk control available.
Recalculate whenever a fixed commitment changes, then track actual revenue against the target weekly rather than monthly. A month is too long to discover you are 20% short.
Comprehensive Guide
Read our business and tax guide for margins, payroll, and tax planning.
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How this guide was created
This guide was written and reviewed by FreeCalculators Editorial, drawing on published formulas, official government sources, and real calculator outputs from our 4 calculators in this category. Every claim is sourced; every formula is auditable. Read our review policy.