Raise the price
When it may fit: Customers value the offer more than the price.
Evidence needed: Price tests and competitor prices.
Trade-off: Higher prices can reduce volume.
Create a Business Brief
How to Calculate Break-Even Sales
Break-even is the number of sales at which a business stops losing money. It is the single most useful number for a new business, and it is simple to calculate.
1. The business problem
How many sales do I need each month before the business covers its costs?
New businesses are often judged on revenue. But revenue is not what pays the bills. What pays is what is left of each sale after its direct cost, and that has to cover all the fixed costs before any profit appears.
Break-even turns that into a target a founder can work toward and check against evidence.
2. What the evidence can reveal
The calculation uses three numbers:
- Calculated Price per sale.
- Calculated Direct cost per sale, which gives the contribution: price less direct cost.
- Calculated Fixed costs per month, which the contributions must cover.
- Calculated Break-even sales: fixed costs divided by contribution per sale.
The result should then be compared with what the market can plausibly supply, which is where evidence comes in.
3. Investigate the problem
In the sample, Illustrative the price is $62 and the direct cost $31, so the contribution is $31, or 50% of the price. Fixed costs are $11,600 a month. Calculated Break-even is therefore $11,600 divided by $31, about 374 sales a month. At the expected volume of 600 sales a month, that is about 62% of the target.
Calculated Every input moves it. A 10% rise in price (to $68.20) lifts the contribution to $37.20 and cuts break-even to about 312 sales. A 10% fall in direct cost (to $27.90) lifts the contribution to $34.10 and cuts break-even to about 340. A 10% cut in fixed costs (to $10,440) cuts break-even to about 337. Price is the strongest lever because the extra dollars have no added cost.
Calculated In the conservative case, price is 5% lower and direct cost 5% higher, so the contribution falls to about $26.35 and break-even rises to about 440 sales, above that case’s volume of 420 sales at maturity. The business then never breaks even. Information gap The calculation says nothing about whether 374 customers exist. That is the market question the evidence table asks.
4. Explore the interactive experience
Investigate it yourself.
Business Idea Investigator: a guided investigator that separates evidence from assumptions, a startup financial simulator with three cases, scripted answers from APIS, and a printable preliminary assessment, all running on what you type.
The experience below starts with a sample idea. Replace it with your own, or clear it. Nothing you type leaves your browser, and APIS supplies no market data here.
- In Startup economics, find the break-even figure. Then raise the price by 10% and watch it fall.
- Switch to the Conservative case. Is break-even above or below its volume?
- Ask APIS “What is my break-even?”
5. Evaluate possible solutions
There are four ways to lower break-even, and each has a limit.
6. What leadership should do next
Questions to answer
- What is my contribution per sale?
- What are my fixed costs per month?
- How many sales is break-even?
- Is it plausible, and what if it is not?
Data to gather
- Price
- Direct cost per sale
- Fixed costs per month
- Evidence of demand
Steps to take
- Calculate break-even.
- Test each lever.
- Compare with evidence of demand.
- Repeat for the conservative case.
7. Engage Two Pillars
Turn Your Business Idea Into a Structured Plan
Two Pillars can help founders evaluate business concepts, research markets, build financial models, plan operations and coordinate the professional guidance a new business needs. A good first step is a break-even model that tests each lever and compares the result with evidence of demand.
Sources and data notes
- The organization, its figures, and every number in this article and its interactive experience are synthetic and illustrative. They are not real data, a benchmark, or a forecast.
- Reviewed October 2026. This article describes an approach to investigation. It does not replace review by qualified professionals, and it is not legal, tax or financial advice.