# Break-even point: how many sales before you make a profit

> Break-even is the number of units you must sell before income covers all your costs. With ₹60,000 of fixed costs, a ₹500 price and ₹300 of variable cost per unit, you break even at exactly 300 units, which is ₹1,50,000 of sales. This guide shows the formula, the graph and five ways to move the point.

Published 2026-10-08 by Toolcloak. 3 minute read. Original: https://toolcloak.pages.dev/articles/break-even-point-how-many-sales-before-you-make-a-profit
Related free tool: [Break-Even Calculator](https://toolcloak.pages.dev/tools/break-even-calculator)

Every business starts the month in the red. Rent, salaries and software are due whether you sell one item or a thousand. Break-even tells you exactly how far into the month the red turns to black, and it needs only three numbers.

> **In short**
> - **Break-even units = fixed costs ÷ (price − variable cost per unit).** The bracket is called the contribution per unit.
> - Example: ₹60,000 ÷ (₹500 − ₹300) = **300 units**, or **₹1,50,000** of sales.
> - Below 300 units you lose money. Above it, each extra unit adds **₹200** of profit.
> - A small price change moves break-even a lot: **₹550 instead of ₹500 cuts it from 300 to 240 units**.

## Two kinds of cost

**Fixed costs** do not change with sales in the short run: rent, salaries, loan interest, subscriptions. **Variable costs** rise with every unit: raw material, packaging, delivery, payment fees. Break-even depends on keeping the two lists apart.

**Our example business, per month**

|  | Value | Note |
| --- | --- | --- |
| Fixed costs | ₹60,000 | Rent, wages, tools |
| Price per unit | ₹500 |  |
| Variable cost per unit | ₹300 | Materials, packing |

## What each sale contributes

Each unit you sell brings in ₹500, but ₹300 of it is used up making and delivering that unit. The ₹200 left is the **contribution**. It goes first towards the fixed costs and, once those are paid, becomes profit.

**One unit, from price to contribution (₹)**

| Step | Amount |
| --- | --- |
| Price | ₹500 |
| Variable cost | −₹300 |
| Contribution | ₹200 |

*The contribution margin is ₹200 ÷ ₹500 = 40%. Forty paise of every sales rupee is available to pay fixed costs.*

> **Break-even units = fixed costs ÷ contribution per unit:** ₹60,000 ÷ ₹200 = 300 units. In rupees: ₹60,000 ÷ 0.40 = ₹1,50,000 of sales. Both give the same answer, one counted in units and the other in sales.

**Revenue against total cost as units grow**

| Units sold | Revenue | Total cost | Fixed cost only |
| --- | --- | --- | --- |
| 0 | 0 | 60000 | 60000 |
| 100 | 50000 | 90000 | 60000 |
| 200 | 100000 | 120000 | 60000 |
| 300 | 150000 | 150000 | 60000 |
| 400 | 200000 | 180000 | 60000 |
| 500 | 250000 | 210000 | 60000 |
| 600 | 300000 | 240000 | 60000 |

*The two main lines cross at 300 units, the break-even point. To the left the cost line is higher, so you lose. To the right the revenue line is higher, so you profit.*

Try it: [Break-Even Calculator](https://toolcloak.pages.dev/tools/break-even-calculator). Enter your fixed cost, price and variable cost to find the break-even units and sales.

## Profit and loss at different volumes

**Contribution against fixed costs at different volumes**

|  | Contribution earned (units × ₹200) | Still short of ₹60,000 |
| --- | --- | --- |
| 200 units | ₹40k | ₹20k short |
| 300 units | ₹60k covers it |
| 450 units | ₹60k fixed costs | ₹30k profit |

*At 200 units the contribution is ₹40,000, so ₹20,000 of the fixed costs is left unpaid. At 450 units the first ₹60,000 pays the fixed costs and the next ₹30,000 is profit.*

## How far can sales fall? The margin of safety

If you expect to sell 450 units, your break-even is 300, so you are 150 units above it. Divided by 450, that is a margin of safety of 33%. Sales could fall by a third before you start losing money.

**Margin of safety at 450 units**

| Zone | Range |
| --- | --- |
| Fragile | under 10% |
| Workable | 10–25% |
| Comfortable | over 25% |

*The bands are a rough rule of thumb, not an official standard. Seasonal businesses usually want more cushion.*

## Five levers that move the break-even point

**Break-even units under different prices (fixed cost ₹60,000, variable cost ₹300)**

|  | Units |
| --- | --- |
| Price ₹450 | 400 units |
| Price ₹500 | 300 units |
| Price ₹550 | 240 units |
| Price ₹600 | 200 units |

*A 10% higher price (₹550) cuts the target by 20%. But a higher price may also cut how many units you sell, so test it carefully.*

1. **Raise the price.** Every rupee goes straight into the contribution. See [markup vs margin](https://toolcloak.pages.dev/articles/markup-vs-margin-why-a-50-percent-markup-is-only-a-33-percent-margin) before you pick a number.
2. **Cut variable costs.** Cheaper packaging, better supplier terms or fewer returns raise the contribution per unit.
3. **Cut fixed costs.** A ₹20,000 lower rent moves break-even from 300 units to 200 units.
4. **Change the mix.** If you sell several products, push the ones with the highest contribution.
5. **Avoid deep discounts.** A 10% discount on a ₹500 item cuts contribution from ₹200 to ₹150 and pushes break-even from 300 to 400 units. The [stacked discount guide](https://toolcloak.pages.dev/articles/50-percent-off-plus-20-percent-off-is-not-70-percent-off) shows how fast it adds up.

**Break-even units for different fixed costs and prices (variable cost ₹300)**

| Fixed cost | ₹450 | ₹500 | ₹550 |
| --- | --- | --- | --- |
| ₹40,000 | 267 | 200 | 160 |
| ₹60,000 | 400 | 300 | 240 |
| ₹80,000 | 533 | 400 | 320 |

## Setting a profit target

To earn ₹30,000 a month, add it to the fixed costs: (₹60,000 + ₹30,000) ÷ ₹200 = **450 units**. The same formula works for any target.

## Limits of the simple model

- It assumes the price and the variable cost stay the same at every volume. Bulk discounts and overtime break that.
- Some costs are in between, such as a salary that steps up when you hire. Treat them as fixed for each range of volume.
- It ignores timing. You may need cash for stock long before the sales come in, so a business that breaks even on paper can still run short.
- Taxes and loan repayments are not in the simple formula. Add loan interest to fixed costs and plan repayments separately.

> **Use it before you spend:** Before signing a lease or hiring, add the new cost to the fixed costs and recompute. If the new break-even is higher than you have ever sold in a month, wait or find a smaller step.

## Frequently asked questions

### What is the break-even formula?

Break-even units = fixed costs ÷ (selling price per unit − variable cost per unit). Break-even sales = fixed costs ÷ contribution margin ratio.

### What is contribution margin?

It is the price minus the variable cost per unit. It is the amount each unit contributes towards fixed costs and then profit.

### Is rent a fixed or variable cost?

Rent is normally a fixed cost because it does not change with the number of units you sell.

### How can I lower my break-even point?

Raise the price, cut variable costs, cut fixed costs, or shift sales to higher-contribution products.

### What does margin of safety mean?

It is how far sales can fall below your expected level before you reach break-even. (Expected sales − break-even sales) ÷ expected sales.