How many sales until you break even?
Enter your monthly fixed costs, your price and what each sale costs you to deliver. See how many sales a month cover the bills and, if you are not there yet, how long the cash in the bank will last. Nothing you type leaves your browser.
A guide, not professional advice. Related reading: The first ten customers: where new businesses get stuck.
In short. Your break-even point is the number of sales a month at which income covers all your costs. Work it out by taking your price per sale, subtracting the variable cost of delivering that sale to get the contribution per sale, then dividing your monthly fixed costs by that contribution. Below that number you are spending savings; above it you are making a profit.
How the numbers work
- Contribution per sale = price per sale minus the variable cost of each sale.
- Contribution margin = contribution per sale / price per sale.
- Break-even sales a month = monthly fixed costs / contribution per sale, rounded up.
- Break-even revenue a month = break-even sales x price per sale.
- With drawings = (monthly fixed costs + your drawings) / contribution per sale, rounded up.
- Monthly shortfall = monthly fixed costs + your drawings minus (sales a month now x contribution per sale).
- Runway in months = cash available / monthly shortfall, if there is a shortfall.
Fixed costs are the ones the business pays whatever you sell: rent, software, insurance. Your own drawings are entered separately, so the headline shows the business break-even and a second figure shows the sales needed to cover your drawings too. Variable costs rise with each sale: materials, delivery, payment fees, commission. If each sale only covers its own cost, it contributes nothing to fixed costs and no number of sales breaks even. Runway assumes the figures stay the same each month; late payers, stock bought upfront and loan repayments can make real cash run out sooner.
A worked example
A home baker sells a cake box for 30 and each box costs 12 in ingredients, packaging and delivery, so each sale contributes 18. Fixed costs are 900 a month. 900 / 18 = 50 boxes a month to break even, or 1,500 of sales. Selling 20 boxes a month today leaves a shortfall of 540 a month, so 3,000 in the bank lasts about five and a half months while sales grow.
Questions people ask
How do I calculate my break-even point?
Subtract the variable cost of one sale from its price to get the contribution per sale, then divide your monthly fixed costs by that contribution. The answer is the number of sales a month you need to cover your costs.
What is the difference between fixed and variable costs?
Fixed costs stay the same whatever you sell, such as rent or software. Variable costs go up with each sale, such as materials, delivery and payment fees.
What is cash runway?
Runway is how many months your cash lasts at the current rate of loss. Divide the cash available by the amount you are short each month.
What if I sell more than one product?
Use an average price and an average variable cost across a typical month of sales, or run the calculator once for your main product.
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