Break-even analysis worksheet

What break-even tells you

Your break-even point is the level of sales at which total revenue exactly covers total costs — no profit, no loss. Below it you are funding losses from cash; above it every sale contributes to profit. Knowing the number turns vague worry into a target you can manage against.

Break-even rests on three figures: your fixed costs (rent, salaries, software, insurance — costs that don't move with sales), your selling price per unit, and your variable cost per unit (materials, delivery, transaction fees — costs that rise with each sale). The gap between price and variable cost is your contribution per unit: the slice of each sale that goes towards covering fixed costs.

The worksheet — fill these rows in

Copy this table into a spreadsheet. Enter your own numbers in the input rows; the calculated rows show the formula to paste.

Row	Item	Value / formula
A	Selling price per unit (£)	Your figure
B	Variable cost per unit (£)	Your figure
C	Contribution per unit (£)	= A − B
D	Contribution margin (%)	= C ÷ A
E	Total fixed costs per month (£)	Your figure
F	Break-even in units	= E ÷ C
G	Break-even in revenue (£)	= E ÷ D

Row F is how many units you must sell each month to break even; row G is the same point expressed in pounds of sales.

A worked example

Say you sell a product for £80 (row A) and each one costs £30 in materials and delivery (row B). Your contribution per unit is £50 (row C) and your contribution margin is 62.5% (row D). If fixed costs run to £15,000 a month (row E), then:

• Break-even in units = £15,000 ÷ £50 = 300 units a month
• Break-even in revenue = £15,000 ÷ 0.625 = £24,000 a month

So you need 300 sales, or £24,000 of revenue, just to stand still. Unit 301 onwards earns £50 of profit each. These figures are illustrative — plug in your own to get a number you can act on.

Add a margin of safety

Break-even alone is a survival line. The margin of safety tells you how much head-room sits between your actual sales and that line — how far revenue could fall before you start losing money.

Item	Formula
Actual (or forecast) sales £	Your figure
Margin of safety £	= Actual sales − Break-even revenue
Margin of safety %	= Margin £ ÷ Actual sales

A thin margin of safety — say under 15% — is a warning that a small dip in demand or a price cut could push you into loss. A fat margin gives you room to invest, discount, or absorb a quiet month.

Using break-even for decisions

Recalculate the worksheet whenever something material changes, and use it to pressure-test decisions before you commit:

• Hiring or new premises — add the extra fixed cost to row E and see how many more units you must sell to justify it.
• Price changes — even a small rise in row A lifts contribution and lowers break-even faster than most directors expect.
• Discounting — a deep discount cuts contribution per unit, so you have to sell far more just to hold profit flat.
• Taking on finance — if you are weighing short-term business finance to fund stock or a new contract, break-even shows the sales the funded activity needs to generate to be worth it.

For a guided version of the same maths, see the break-even calculator.