Break-Even Point: How Much to Sell Each Month
Learn the simple formula to find how many units you need to sell each month to cover costs, with examples for products and services.
Key takeaways
- The break-even point is the number of units or sales value that covers all your monthly business costs, with no profit or loss.
- You only need three numbers: your monthly fixed costs, your unit selling price, and your variable cost per unit.
- The formula is: fixed costs ÷ (selling price − variable cost per unit). The result is the number of units you need to sell before you start making a profit.
- If your break-even point is higher than what you can realistically sell, you have three levers: reduce fixed costs, raise your price, or lower your unit cost.
Your break-even point is the number of units you need to sell each month to cover all your business costs, with no profit and no loss. You calculate it by dividing your monthly fixed costs by the difference between your unit selling price and your variable cost per unit. If your fixed costs are SAR 6,000 (about $1600), and you sell each box for SAR 50 (about $13) while it costs you SAR 20 (about $5) to make, you need to sell 200 boxes a month before you make a single riyal in profit. This guide explains the three numbers you need, the formula with a full example, how to calculate it for a service business or a store with many products, and what to do if the number comes out higher than expected. This is general guidance, not financial or accounting advice.
Why calculate your break-even point before you start?
Because it turns the question “Will this business work?” into a number you can actually judge. Saying “I’ll sell a lot” means nothing. Saying “I need 7 orders a day” is something you can compare with what a similar shop sells, how many visitors your store gets, or how much you can produce. It is also useful after you launch. If you are thinking about moving to a more expensive location, hiring an assistant, or lowering your price in a promotion, you can recalculate and see how many extra units that decision would require.
The three numbers you need
- Monthly fixed costs: what you pay every month whether you sell or not, such as rent, salaries, your store platform subscription, software, internet, and equipment installments. If a cost is annual, divide it by 12.
- Unit selling price: what you actually receive from the customer after any discount you usually give, not the sticker price.
- Variable cost per unit: what you spend on each unit you sell, such as raw materials, packaging, shipping you cover, and payment gateway or platform fees.
The difference between the selling price and the variable cost is called the contribution margin. This is the amount each unit contributes toward covering your fixed costs. Every unit you sell covers part of your rent and salaries. Once all fixed costs are covered, the margin on each additional unit becomes profit.
The break-even formula with a full example
The formula is: break-even point in units = monthly fixed costs ÷ (unit selling price − variable cost per unit). Take this simple example of a home bakery selling dessert boxes through an online store:
| Item | Monthly or unit value | Note |
|---|---|---|
| Fixed costs | SAR 6,000 (about $1600) per month | Rent for a small kitchen, one assistant’s salary, and the store subscription |
| Selling price per box | SAR 50 (about $13) | After the usual discount |
| Variable cost per box | SAR 20 (about $5) | Ingredients, packaging, and payment fees |
| Contribution margin | SAR 30 (about $8) | 50 − 20 |
| Break-even point | 200 boxes per month | 6,000 ÷ 30, or about 7 boxes a day |
| Sales value at break-even | SAR 10,000 (about $2667) | 200 × 50 |
After box number 200 in the month, the margin on each box, which is SAR 30, becomes profit before tax. If the bakery sells 260 boxes, its profit would be about SAR 1,800. If it sells 150 boxes, it would lose about SAR 1,500. These numbers are only for illustration, so replace them with your own business figures.
Break-even for a service business or a store with many products
In a service business, such as design, training, or maintenance, the unit may be an hour, a project, or a session. Variable costs are often small, such as platform fees or transport, but your time is limited. So calculate your break-even point in hours too, and compare it with the hours you can actually work after customer replies, marketing, and admin.
In a store that sells many products at different prices, do not calculate break-even separately for every product. Instead, calculate the average contribution margin ratio from a real month of sales: (sales − variable costs) ÷ sales. Then divide your fixed costs by that ratio. The result is the monthly sales value you need in riyals. If the ratio is 40% and your fixed costs are SAR 8,000 (about $2133), you need monthly sales of about SAR 20,000 (about $5333).
What if your break-even point is higher than you can sell?
Do not ignore the number, and do not keep changing assumptions until you like the result. You have three levers. Test each one, then recalculate:
- Reduce fixed costs: start with a smaller location, use part-time help instead of a full-time employee, or cancel subscriptions you do not use.
- Raise your price: if your product stands out from competitors in quality, speed, or service, your customers may accept a higher price. Increase it slightly and watch sales.
- Lower your variable cost: get better volume pricing from a supplier, use simpler packaging, or create a bundle so shipping cost per unit goes down.
If your break-even point is still far beyond what you can realistically sell or produce after trying all three levers, it is better to rethink the idea or the size of your launch before spending more on it.
Common break-even mistakes
- Forgetting to include your own salary: if you work in the business, your salary is a fixed cost. Otherwise, break-even may simply mean you are working for free.
- Ignoring small repeated costs: payment fees, free shipping, and returns eat into every unit.
- Using the price before discount: if most orders include a discount, calculate using the price after it.
- Confusing break-even with cash flow: you may hit break-even on paper while the cash arrives late, leaving you unable to pay rent on time.
- Calculating it only once: any change in rent, price, or material cost changes the number, so recalculate every few months.
How much does break-even analysis cost on Hylance?
If you want a specialist to review your numbers, Hylance has services that calculate the break-even point for your business in a ready-made sheet, others that review your product pricing and margins, and others that build a monthly cash flow sheet to show which months your balance may run low. At the time of writing, these services start at about SAR 55 to SAR 65 (about $15 to $17). The exact price, delivery time, and what is included are listed on each service page. You send your numbers in the order chat inside the platform, and you pay from your Hylance wallet. The amount stays on hold and is only released to the seller after you confirm delivery. Before delivery, you can cancel the order and have the amount returned to your wallet. After delivery, you can open a dispute for the team to review. Your first service order also gets a 10% discount as part of the launch offer.
Break-Even and Cost Calculation Services on Hylance
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Monthly cash flow table for 6 months showing low-balance months
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Frequently asked questions
How do I calculate the break-even point for a small business?
Add up your monthly fixed costs, such as rent, salaries, and subscriptions. Then subtract the variable cost per unit from the selling price to find your contribution margin. Divide your fixed costs by that margin. The result is the number of units you need to sell each month to cover your costs.
What is the difference between fixed and variable costs?
Fixed costs are what you pay every month whether you sell or not, such as rent, salaries, and software subscriptions. Variable costs increase with each unit you sell, such as raw materials, packaging, shipping, and payment gateway fees.
What should I do if my break-even point is higher than I can sell?
Try three levers and recalculate after each one: reduce fixed costs, raise your price if your customers will accept it, or lower your unit cost with a cheaper supplier or simpler packaging. If the number is still far beyond what you can realistically sell, revisit the business idea before you start.
Ready to put this into practice?
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