How to calculate break-even sales for a small business
Break-even gives a useful operating target when fixed and variable costs refer to the same period and products.
Open the Break-Even Calculator →Choose a period and use it throughout
A monthly break-even target needs monthly fixed costs and a realistic view of the orders you can sell in that month. Include costs such as regular software, workspace and insurance on a consistent basis. Keep annual bills visible rather than forgetting them in a month when no payment is taken.
Then work out contribution per order after variable product, postage and fee costs. Divide fixed costs by that contribution and round up to a whole order. £300 of fixed costs divided by £8 contribution is 37.5, so the business needs 38 such orders under these assumptions.
Test what happens when contribution changes
A £1 reduction in contribution can matter more than it first appears. At £8 per order, £300 needs 38 orders. At £6, it needs 50. At £4, it needs 75. Changes in postage, discounts or advertising can move the target without changing the monthly bill at all.
Use current product costs and applicable fees before calculating the target. If contribution is zero or negative, the entered product cannot cover the fixed costs at any positive sales volume. Review the price or cost assumptions first.
| Monthly fixed costs | Contribution/order | Break-even orders |
|---|---|---|
| £300 | £8 | 38 |
| £300 | £6 | 50 |
| £300 | £4 | 75 |
Account for a mixed catalogue
A business selling several products will not necessarily receive the same contribution on each order. Use a realistic sales mix to estimate a weighted contribution, or calculate scenarios separately for the main products. An average based on equal quantities can be misleading when one low-contribution item accounts for most sales.
Keep the mix assumption with the target and review it against actual orders. Reaching a total order count does not establish break-even if the orders were mainly the products that contribute less. The calculator is a planning tool, while actual records establish what happened.
A worked example
£300 fixed monthly costs and £8 contribution per unit need 37.5 units, so the whole-unit break-even target is 38.
Before you use the result
- Use one period for fixed costs and sales.
- Include variable fees, postage and advertising before contribution.
- Round required orders up.
- Document the assumed product mix.
- Compare the target with actual records at month-end.
Common questions
Is break-even the same as my income target?
Break-even covers the fixed costs entered under the assumed contribution. To include an additional pre-tax income or profit target, add it separately and use the target profit sales calculator.
Should I use revenue per order in the denominator?
Use contribution after the variable costs of making that sale. Using revenue alone ignores the costs of producing and fulfilling the extra orders and can seriously understate the required volume.
Put the numbers into practice
Break-Even Calculator →How to allocate business overhead per product or order →How to review small-business costs each month →Contribution margin vs net profit for online sellers →A practical calculation guide, not professional accounting, legal or tax advice. Examples are illustrative unless identified as official. Calculation methodology and limitations.