Break-even point and break-even days calculator
Calculate the minimum revenue needed to cover all your costs, your break-even days and your margin of safety in seconds.
What is the break-even point?
The break-even point is the level of revenue at which a business covers all of its costs and starts to make a profit. At this exact point, the result is zero: the business neither gains nor loses money. It is a central indicator of the business plan and of financial management, because it answers a simple question: “how much do I need to sell to be profitable?”.
Its calculation relies on the distinction between two types of costs. Fixed costs (rent, fixed salaries, insurance, subscriptions) stay stable whatever the volume of activity. Variable costs (purchases of goods, raw materials, commissions) increase in proportion to revenue.
Fixed costs
Rent, fixed salaries, insurance, subscriptions, depreciation: independent of the level of sales.
Variable costs
Purchases, raw materials, commissions, subcontracting: proportional to revenue.
Contribution margin
What is left from revenue after variable costs to cover fixed costs, then generate profit.
How to calculate it? The formula step by step
The break-even point is obtained in three steps, starting from the contribution margin:
1. Contribution margin = Revenue − Variable costs
2. Contribution margin ratio = Contribution margin ÷ Revenue
3. Break-even point = Fixed costs ÷ Contribution margin ratio
Example: for revenue of €120,000, variable costs of €60,000 and fixed costs of €40,000, the contribution margin is €60,000, i.e. a contribution margin ratio of 50%. The break-even point is then €40,000 ÷ 0.50 = €80,000 of revenue. Below this amount, the business runs at a loss; above it, it is profitable.
Break-even days and margin of safety
The break-even in days expresses the break-even point as a duration. It indicates the number of days of activity needed to reach the break-even revenue: break-even days = (break-even point ÷ annual revenue) × 365. In the previous example, (80,000 ÷ 120,000) × 365 ≈ 243 days: the business becomes profitable from the 243rd day of the financial year.
The margin of safety measures the room for manoeuvre before falling back below break-even: margin of safety = revenue − break-even point. It shows by how much revenue can fall without the business becoming loss-making. The margin of safety ratio (margin of safety ÷ revenue) expresses it as a percentage: the higher it is, the more the business withstands a slowdown.
Finally, the projected profit follows directly: profit = contribution margin − fixed costs. Together, these indicators help to set a selling price, size fixed costs or judge the soundness of a project before starting out.
Frequently asked questions about the break-even point
What is the break-even point?▼
What is the break-even point formula?▼
How do you calculate break-even in days?▼
What is the difference between fixed costs and variable costs?▼
What is the margin of safety?▼
Does the result of this calculator have any official accounting value?▼
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