What are fixed vs variable costs?

Fixed costs stay the same regardless of sales volume: rent, salaries, insurance, loan repayments, software subscriptions. Variable costs change with each sale: raw materials, packaging, shipping, sales commissions, payment processing fees. Some costs are semi-variable (e.g., electricity — a base amount plus usage).

How do I use break-even for pricing?

Calculate break-even at several price points. A higher price = fewer sales needed to break even, but potentially fewer customers. A lower price = more sales needed but potentially higher volume. The sweet spot is where contribution margin × realistic sales volume maximises profit.

Should I include GST in break-even?

No. Calculate break-even using GST-exclusive figures. GST is collected on behalf of the ATO and offset by input credits — it's a pass-through, not a real cost or revenue. Using GST-inclusive figures will overstate both your revenue and variable costs but give the same break-even in units.

Break Even Calculator

Calculator

Calculate your business break-even point — how much revenue you need to cover all costs. Essential for pricing, planning, and new venture viability.

Free to useNo data storedAI insightsUpdated: February 2026

The break-even point is where your revenue exactly equals your total costs — no profit, no loss. It's the minimum you need to sell just to keep the lights on. Every unit sold above break-even is profit; every unit below is a loss. This analysis is essential before launching a new product, setting prices, or deciding whether a business idea is viable. It also helps existing businesses understand the impact of cost changes or price adjustments.

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Real-World Examples

Coffee Shop

Monthly fixed costs: $20,000 (rent, staff, utilities). Average coffee price: $5.50. Variable cost per coffee: $1.80.

Contribution margin: $3.70 per coffee. Break-even: $20,000 ÷ $3.70 = 5,406 coffees/month = 180 coffees/day (30 days). At 250 coffees/day, profit = (250 - 180) × $3.70 = $259/day = $7,770/month.

E-commerce Store

Fixed costs: $8,000/month. Average order value: $65. Variable cost (product + shipping): $32.

Contribution margin: $33. Break-even: 243 orders/month = ~8 orders/day. If currently selling 350 orders/month, profit = (350 - 243) × $33 = $3,531/month. To hit $10,000 profit, need 546 orders/month.

Frequently Asked Questions

Glossary

Break-Even Point

The level of sales at which total revenue equals total costs. Below this point, the business makes a loss; above it, a profit.

Contribution Margin

Selling price minus variable cost per unit. The amount each sale 'contributes' toward covering fixed costs. Higher margin = faster path to profitability.

Fixed Costs

Business expenses that remain constant regardless of sales volume. Examples: rent, salaries, insurance, loan repayments.

Variable Costs

Business expenses that change proportionally with sales volume. Examples: raw materials, packaging, shipping, commissions.

Related Tools

Cash Flow Forecast

Project your cash position based on break-even analysis.

Business Loan Calculator

Include loan repayments in your fixed costs for break-even.

GST Calculator

Calculate GST on your products for accurate pricing.

How to Use

1Enter your monthly fixed costs (rent, salaries, insurance, etc.).
2Input your average selling price per unit or service.
3Enter the variable cost per unit (materials, COGS, commissions).
4Optionally add your current sales volume and profit target.
5See your break-even point in units and revenue, plus contribution margin.

Key Information

Break-even formula: Fixed Costs ÷ (Price - Variable Cost) = units to break even.
The 'contribution margin' is (Price - Variable Cost) — the amount each sale contributes to covering fixed costs.
A higher contribution margin means you break even faster with fewer sales.
Break-even analysis assumes a linear relationship — in reality, you may get volume discounts or economies of scale.

Pro Tips

Run break-even analysis for different price points — a higher price needs fewer sales but may reduce volume.
Include ALL fixed costs: don't forget loan repayments, software subscriptions, insurance, and your own salary.
Use break-even to evaluate whether a price discount is worth it — if you drop price 10%, how many MORE units do you need to sell?
Calculate break-even for each product line separately — some products may be unprofitable and subsidised by others.

Avoid These Mistakes

Forgetting to include the owner's salary as a fixed cost — your time has value.
Not separating fixed and variable costs correctly — some costs are semi-variable (e.g., staff overtime).
Ignoring that variable costs may change at different volumes — bulk purchasing may reduce per-unit costs.
Using break-even as the sales target — break-even is the MINIMUM; your target should be well above it for profit.

Disclaimer: This calculator provides estimates only and should not be relied upon for financial decisions. Interest rates, fees, and policies change frequently. Always verify information with lenders directly. This is general information, not personal financial advice. Consider seeking advice from a licensed mortgage broker or financial advisor.

Last updated: February 2026