Monthly Break-Even Calculator

Monthly break-even analysis is the most fundamental tool in business planning. It tells you the exact minimum revenue your business must generate each month to cover all costs without losing money. Every dollar above that number is profit; every dollar below is a loss.

Core formulas:

Contribution Margin (CM) = Price per Unit − Variable Cost per Unit

Break-Even Units = Monthly Fixed Costs / Contribution Margin

Break-Even Revenue = Break-Even Units × Price per Unit

Alternative using CM ratio:

CM Ratio = Contribution Margin / Price per Unit

Break-Even Revenue = Monthly Fixed Costs / CM Ratio

Variable definitions:

• Fixed costs stay the same regardless of sales volume: rent, salaries, insurance, loan payments.
• Variable costs rise with each unit sold: materials, shipping, commissions, packaging.
• Contribution margin is what each unit puts toward the fixed costs once its own variable cost is paid.
• CM ratio is that margin as a percentage of price. It tells you how much of every revenue dollar is available to cover fixed costs, and it is the number that decides whether a price cut is survivable.

Worked example: A bakery sells cupcakes at $4.00 each. Variable cost per cupcake: $1.50 (ingredients, packaging). Monthly fixed costs: $3,000 (rent, utilities, base wage).

CM = $4.00 − $1.50 = $2.50 Break-even units = $3,000 / $2.50 = 1,200 cupcakes/month Break-even revenue = 1,200 × $4.00 = $4,800/month

Interpretation guide:

• Below 1,200 units a month, the bakery is operating at a loss
• At exactly 1,200 units it breaks even, with zero profit
• Every cupcake above 1,200 adds $2.50 to profit

That last line is the one worth internalizing. Past break-even, profit does not grow at the price. It grows at the contribution margin, which here is 62.5% of the price. Sell 1,600 cupcakes and the extra 400 are worth $1,000, not $1,600.

Safety margin:

Safety Margin = Actual Revenue − Break-Even Revenue

Safety Margin % = (Safety Margin / Actual Revenue) × 100

Above 20% is comfortable. Between 10 and 20% is thin. Below 10%, an ordinary bad month puts you in the red, and a supplier price rise you cannot pass on does it permanently. Enter your current monthly revenue in the optional field and the calculator works this out rather than leaving it as a formula to copy.

Sensitivity tip: Cutting variable costs is usually more powerful than raising prices, because a $0.25 reduction in variable cost does exactly what a $0.25 price rise does to the margin, and no customer ever notices it. Chase the supplier before you touch the price list.

A note on the daily target. Dividing the monthly figure by 30 assumes you trade every day. Most shops do not. Set the trading-days field to what you actually open, or the daily number will look comfortably lower than the one you have to hit.