How to Calculate a Small Business Break-Even Point
Break-even revenue is fixed costs divided by the contribution-margin ratio. If monthly fixed costs are $5,000 and variable costs are 35% of sales, estimated break-even revenue is $5,000 ÷ 0.65 = $7,692.31.
Understand contribution margin
The contribution-margin ratio is the share of each sales dollar left after variable costs. If variable costs are 35% of sales, the contribution-margin ratio is 65%, or 0.65.
Break-even revenue = fixed costs ÷ contribution-margin ratio. With $5,000 monthly fixed costs and a 65% contribution margin, the estimate is $7,692.31 monthly revenue.
Use the break-even calculator
Enter fixed costs for the period, variable costs as a percentage of sales and (optionally) average sale value. The small business break-even calculator estimates the revenue required to cover costs and the approximate number of sales at your average sale value.
Use one period consistently—monthly costs with monthly revenue, for example. For a basic comparison, use consistent GST-exclusive amounts and the same definitions for revenue and costs.
What this estimate leaves out
The result depends on stable costs and a consistent variable-cost share. It does not automatically include financing, tax, owner drawings, seasonal changes, one-off costs or changes in price and sales mix. It is a planning model, not a forecast. Business.gov.au describes break-even as the point where income equals expenses and recommends reviewing business financial information when making decisions; see its financial terms and budgeting guidance.
Try the related calculator
Use the Small business break-even calculator to apply the formula to your own figures. Results are estimates using the assumptions shown on the tool page.
Frequently asked questions
What is the break-even revenue formula?
Break-even revenue = fixed costs ÷ contribution-margin ratio. If variable costs are 35% of revenue, the ratio is 65%.
What counts as fixed costs?
Costs that do not change directly with each unit sold over the period you are modelling may be treated as fixed for a simple estimate. Classify costs consistently and check how they behave in your business.
Does break-even revenue mean the business is profitable?
No. At break-even, the modelled income equals the modelled costs. Profit starts above that point under the same assumptions, but the estimate may omit important costs or changes.