To calculate your break-even point, divide your fixed monthly costs by your contribution margin per unit, which is your price minus the variable cost of making one unit. If your fixed costs are £5,000 a month, you sell at £50, and each unit costs you £20, your contribution margin is £30 and you break even at 167 units a month.
Fixed costs are what you pay whether you sell nothing or a thousand units: rent, salaries, software, insurance. Variable costs scale with each sale: materials, shipping, payment fees, the hosting a single customer consumes. Getting these the wrong way round is the most common error, and it makes the answer meaningless.
Payment processing is the one people forget. A 2.9% fee plus 20p on a £50 order is roughly £1.65 of variable cost per sale, which quietly moves your break-even point every time volume grows.
Contribution margin is price minus variable cost, and it is what each sale actually contributes toward covering your fixed costs. A bigger margin means fewer units to break even, which is why raising price moves break-even faster than cutting fixed costs usually can.
If contribution margin is zero or negative, no amount of volume saves you. You lose more money with every sale, and growth makes the problem larger rather than smaller. That is the first thing to check before doing any other maths.
A break-even figure in units is abstract until you compare it against what you actually sell. If you break even at 167 units and you currently sell 40, the question is no longer the formula, it is whether a four-fold increase is plausible with the channels you have.
Run the same calculation at a higher price before assuming you need more volume. Founders reach for growth when a price change would have got there faster, and price is the one lever you can pull this week without spending anything.
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Free break-even calculator, units and revenue
Break-even units = fixed costs ÷ contribution margin per unit, where contribution margin is price minus variable cost per unit. At £5,000 fixed costs, a £50 price and £20 variable cost, that is £5,000 ÷ £30, or 167 units a month.
Contribution margin is what is left from each sale after the variable cost of that unit: price minus variable cost. It is the amount each sale contributes toward covering fixed costs, so a bigger margin means a lower break-even point.
If contribution margin is zero or negative you lose money on every sale and volume makes it worse, so no amount of growth fixes it. Check that first. The fix is a higher price or a lower variable cost, not more customers.
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