Find the exact sales volume and revenue needed to cover all fixed and variable costs. Know your minimum viable business size before you commit.
Break-even is the point where total revenue equals total costs — zero profit, zero loss. Formula: Break-Even Units = Fixed Costs ÷ (Price − Variable Cost per Unit). The denominator is your contribution margin — what each unit contributes to covering fixed costs.
Price − Variable Cost. Every unit sold above break-even generates this amount as pure profit. Higher contribution margin = faster profitability.
Fixed: rent, salaries, software subscriptions. Variable: materials, packaging, shipping, payment processing fees — costs that scale with sales.
Reduce fixed costs, raise prices, reduce variable costs, or increase average order value. Each has different risk/reward trade-offs.
Target sales 20–30% above break-even. This buffer absorbs demand fluctuations, seasonal dips, and unexpected cost increases.