How Much Do I Need to Sell to Break Even?

For business owners, understanding your break-even point is one of the most important things you can do for your business. Why? Because the break-even point is the number of units you need to sell to cover all your costs, both fixed and variable. Once you reach this point, any additional sales contribute to your profit. At Fidelity Bank, we understand the importance of this calculation, and the U.S. Small Business Administration’s (SBA) break-even calculator can help you determine your target sales volume and potential profit.

Why Knowing Your Break-Even Point Matters
Knowing your break-even point helps you set realistic sales targets and pricing strategies. It also allows you to better plan so that you allocate resources efficiently. By understanding how much you need to sell to cover your costs, you can make informed decisions about controlling expenses and improving profit margins. If you’re considering new investments or expansions, knowing your break-even point can help you evaluate the potential return on investment and assess risks.

Using the Break-Even Calculator

Let’s determine how much you need to sell to break even and estimate your potential profit.

Input your Total Fixed Costs
(These are costs that do not change regardless of the number of units sold, such as rent, salaries, and utilities.)

Input Your Variable Costs per Unit
(These costs vary directly with the number of units produced, such as raw materials and labor.)

Input Your Selling Price per Unit
(This is the price at which you plan to sell each unit.)

Input Your Anticipated Unit Sales
(Number of units you plan to sell)

For example: Let’s say your fixed costs are $20,000, the variable cost per unit is $10, and the selling price per unit is $30.

Fixed Costs: $20,000
Variable Cost per Unit: $10
Selling Price per Unit: $30
Anticipated Unit Sales: 2,000

Explanation of Results
You would need to sell 1,000 units in order to cover your fixed costs. If you sell your anticipated 2,000 units then your profit/loss would be $20,000.

Pro Tips! Keep a close eye on both fixed and variable costs. Look for ways to reduce costs to lower your break-even point and increase profit. In addition, it’s a good idea to evaluate your pricing strategy regularly. Increasing your selling price or reducing costs per unit can significantly impact your break-even point.