Break-even analysis tells you the minimum level of sales required to cover all costs —
the point at which you are neither making a profit nor incurring a loss. Every unit
sold beyond break-even contributes to profit.
Break-Even Units = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit)
The denominator — Price minus Variable Cost — is called the contribution margin:
the amount each sale contributes toward covering fixed costs and, once break-even is
reached, generating profit.
Break-Even Revenue = Break-Even Units × Price per Unit
Freelance / consulting: Fixed costs = overhead + desired salary. Price = day rate
or project fee. Break-even = number of billable days per month.
E-commerce / physical products: Fixed costs = rent, warehouse, staff. Variable
cost = COGS per unit. Break-even = units sold per period.
Frequently asked questions
What counts as a fixed cost vs. a variable cost?
Fixed costs don't change with output volume (rent, salaried staff, software
subscriptions). Variable costs scale directly with each unit sold (materials, payment
fees, shipping, royalties).
How is break-even different from profitability?
Break-even is the floor — zero profit, zero loss. Profitability begins above that.
Break-even analysis is most useful early on to set a minimum sales target and evaluate
whether a pricing model is viable before investing heavily.
Break-Even Analysis for SaaS — How Many Customers Do You Need?
How to calculate your break-even customer count for a SaaS product, including worked examples for different price points and infrastructure costs.
For a SaaS business, break-even analysis answers one question: how many paying
customers do I need to cover my fixed costs? The math is simpler than it looks.
Variable costs per SaaS customer are typically small: hosting ($0.50–$5/month),
support time (pro-rated), and payment processing fees (~3%). For a $49/month product
with $2 variable cost per customer:
Fixed Monthly Costs
Break-Even Customers
Break-Even MRR
$2,000
43
$2,107
$5,000
107
$5,243
$15,000
319
$15,631
$50,000
1,064
$52,136
What counts as fixed cost?
Include: founder salaries, contractor costs, SaaS tools subscriptions,
server/infrastructure costs, office/coworking space, insurance, and
accounting fees. Do not include payment processing fees or per-customer
hosting — those are variable.
The 10× rule for SaaS pricing
If your break-even customer count feels impossibly high, your price is probably
too low. Many SaaS founders use the 10× rule: price at roughly 10% of the annual
value delivered. A tool saving a customer 5 hours/month at $100/hour = $6,000/year
in value → $600/year ($50/month) is defensible pricing.
Break-Even Point for eCommerce — Units, Revenue, and Margin
How to calculate your eCommerce break-even point in units sold and monthly revenue, with worked examples for product businesses with COGS and shipping.
eCommerce break-even analysis is more complex than SaaS because you have both
fixed costs (warehouse, staff, software) and variable costs (COGS, shipping,
payment fees) that vary with each order.
eCommerce break-even formula
Break-even units = Fixed monthly costs ÷ (Selling price − COGS − Variable costs per order)
Low-margin products require dramatically more volume to break even:
Gross Margin
Break-even at $8k fixed costs ($30 product)
60% ($18)
444 orders / $13,320 revenue
46% ($13.80)
580 orders / $17,400 revenue
33% ($10)
800 orders / $24,000 revenue
20% ($6)
1,333 orders / $40,000 revenue
Contribution margin vs gross margin
Contribution margin includes all variable costs (shipping, payment fees,
returns/refunds allowance). Gross margin only subtracts COGS. Always use
contribution margin for break-even analysis — gross margin overstates your
actual per-unit profit.
What Price Do I Need to Break Even? — Reverse Break-Even Calculation
How to calculate the minimum price you need to charge to break even on a product or service, given your fixed costs and expected sales volume.
Instead of asking "how many units to break even?" — sometimes you need to ask
"what price do I need to charge to break even at my expected sales volume?"
This is reverse break-even analysis.
Reverse break-even formula
Minimum price = (Fixed costs ÷ Expected units) + Variable cost per unit
Many founders choose prices based on competitor benchmarks without checking
whether those prices are actually profitable given their cost structure. If your
costs are higher than competitors' (smaller production runs, higher shipping costs,
premium materials), you need to either find a price-justified positioning or reduce costs.
Tools our audience uses alongside this calculator.
StripePayments
Once you know your break-even unit count, Stripe's payment infrastructure scales from your first sale to millions — no monthly fee until you process payments.
Sell digital products with no monthly fee (only 10% transaction fee). Good for validating a product idea before investing in a full Stripe integration.