Marketing & Finance
Break-Even Analysis
How many units do you need to sell to cover your costs, and what margin of safety do you have?
- Time: 5 minutes
- With: Founders, product owners, finance
- You get: The volume you need and a feel for how risky your plan is
How to use this worksheet
- Enter fixed costs for one period (month or year): rent, salaries, subscriptions, insurance.
- Enter the variable cost of one unit and the selling price. The difference is the contribution margin.
- Optionally add a profit target and your expected volume to see the units needed and your margin of safety.
- Use the table to see profit at half, equal, one and a half and double the break-even volume.
Costs and price
Use the same period for fixed costs and for volumes.
Write down where the numbers come from and what would change them.
Prompts and example
Example
Fixed costs per month, price excludes VAT.
Results
Before you finish
- Fixed and variable costs are separated correctly.
- Prices exclude taxes.
- The expected volume is realistic, not hoped for.
The formula
Break-even units = fixed costs / (price - variable cost per unit). The denominator is the contribution margin: what each unit contributes to cover fixed costs.
The margin of safety shows how far sales can fall below plan before you make a loss. A thin margin means the plan has little room for error.
Recommended reading
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- The Small Business Financial PlannerTerry Dickey
Practical tools for financial planning including break-even analysis, cash flow management, and profitability strategies.