Break Even Calculator
Break Even Calculator – Quickly see how many units you must sell to cover your costs—and what revenue that means. This free tool calculates your contribution per unit, break‑even units & revenue, optional target profit, and margin of safety if you add a sales forecast. It supports VAT‑inclusive or exclusive pricing and uses UK currency/formatting.
Tip: Toggle “includes VAT” on price or costs and the tool will net values to ex‑VAT for profitability.
Break Even Calculator
How to use this calculator
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Enter your selling price per unit and tick “includes VAT” if applicable.
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Enter your variable cost per unit (materials, shipping, payment fees, packaging) and tick “includes VAT” if needed.
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Add your monthly fixed costs (rent, salaries, software, insurance, utilities).
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Set the VAT rate (20% by default in the UK).
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(Optional) Add sales forecast (units/month) to see margin of safety and payback months.
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(Optional) Add a target profit per month to see units and revenue required to hit that goal.
What the results show
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Contribution per unit: Price (ex‑VAT) minus variable cost (ex‑VAT).
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Break‑even units (rounded): Number of units needed to cover fixed costs.
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Break‑even revenue (ex‑VAT): Revenue needed at your current price to reach break‑even.
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Payback time (months): Break‑even units ÷ forecast sales per month.
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Margin of safety: Forecast sales minus break‑even units (and the % buffer).
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Target profit scenario: Units and revenue required to cover fixed costs plus your profit target.
Why break‑even analysis matters
Understanding break‑even helps you:
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Set sustainable prices and discount limits.
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Decide if you should raise price or reduce variable cost.
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Assess new products and marketing campaigns.
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Build confident cash‑flow forecasts and sales targets.
The formula (quick reference)
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Contribution per unit = Selling price (ex‑VAT) − Variable cost (ex‑VAT)
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Break‑even units = Fixed costs ÷ Contribution per unit
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Break‑even revenue (ex‑VAT) = Break‑even units × Selling price (ex‑VAT)
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Units for target profit = (Fixed costs + Target profit) ÷ Contribution per unit
If contribution ≤ 0, break‑even isn’t possible—raise price or reduce variable cost.
Worked example
A coffee roaster sells a gift box for £36 inc. VAT, variable cost £14 inc. VAT. Monthly fixed costs are £5,000, VAT 20%.
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Price ex‑VAT = £36 ÷ 1.20 = £30.00
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Variable cost ex‑VAT = £14 ÷ 1.20 = £11.67
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Contribution = £30.00 − £11.67 = £18.33
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Break‑even units = £5,000 ÷ £18.33 ≈ 273 units
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Break‑even revenue (ex‑VAT) = 273 × £30.00 = £8,190 (≈ £9,828 inc. VAT)
If they forecast 350 units/month, margin of safety is 77 units (22%) and payback time ≈ 0.78 months.
Common pitfalls to avoid
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Forgetting fees in variable cost (payment processing, marketplace, packaging, pick & pack).
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Mixing inc‑VAT and ex‑VAT numbers—use the tick boxes to handle VAT correctly.
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Underestimating fixed costs: include realistic salaries and software tools.
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Ignoring discounts: model sale pricing to ensure it still covers contribution.
VAT Calculator FAQ
Should I use inc‑VAT or ex‑VAT figures?
Either—tick the “includes VAT” boxes as needed and the calculator converts them to ex‑VAT for profitability.
What counts as a variable cost?
Costs that rise with each unit sold: materials, freight, transaction fees, packaging, commissions.
What counts as a fixed cost?
Costs that don’t change with volume (within reason): rent, payroll, insurance, subscriptions, utilities, marketing retainers.
Can I model services, not just products?
Yes. Treat units as billable hours or projects, and set variable cost per “unit of service”.
How do discounts affect break‑even?
Lower selling price → lower contribution → higher break‑even units. Test common discounts (e.g., 10%) to see the impact.