Business Break-Even Calculator — the United States 2026
Find out how many sales you need to cover your costs.
Model US business break-even with USD revenue, sales-tax-aware pricing, payroll, rent, inventory, overheads, contribution margin, and target profit.
United States Business Break-Even Notes
US business break-even work should separate sales tax from usable revenue and include payroll taxes, rent, inventory, shipping, SaaS tools, and payment-processing fees.
Use this version to test whether a product, local service, ecommerce store, or agency offer can cover overheads before owner distributions.
US setup: this business break even is tuned for dollar-denominated scenarios, American payroll and tax references, state-by-state cost differences, and the finance terms people see in lender, employer, or IRS-facing documents.
The page keeps US language in place where it is relevant, including IRS, federal withholding, FICA, 401(k), sales tax, miles, APR, down payment, paycheck, state tax, and USD totals.
Treat the answer as a United States estimate; before acting, compare it with provider disclosures, state rules, federal guidance, lender underwriting, payroll settings, or advice from a qualified professional.
Uses sales tax-exclusive figures. Break-even = Fixed costs ÷ (Price − Variable cost). Not accounting advice.
Select the question that matches where you are right now.
Your break-even point is the minimum sales level where your business covers all its costs. Below this, you make a loss. Above this, every additional unit sold generates pure contribution margin as profit.
Every unit sold contributes its CM toward covering fixed costs. Once fixed costs are covered (at break-even), each additional unit sold generates pure profit. High CM ratio = fast profit growth above break-even.
High fixed costs relative to variable costs create "operating leverage." Above break-even, profits grow rapidly with each additional unit. Below break-even, losses accumulate quickly. This is why break-even analysis matters most for businesses with significant fixed overheads.
Break-even revenue = BE units × selling price = Fixed costs ÷ CM ratio. This is often more useful than units — it tells you the minimum monthly revenue your business must generate, regardless of how many products or services you sell.
Margin of safety (MOS) = Current units − Break-even units. It tells you how far sales can fall before you make a loss.
A 20%+ MOS means sales would need to fall by more than 20% before you make a loss. A 5% MOS means a small downturn pushes you into losses. Seasonal businesses should plan for their lowest-volume period to still be above break-even.
Stable recurring revenue businesses: 15–25% MOS is comfortable. Seasonal or project-based businesses: aim for 30%+ in peak months. High fixed cost businesses (restaurants, manufacturing): MOS below 10% is high risk — fixed costs cannot be easily reduced in a downturn.
You can improve MOS by: selling more units (increase MOS numerator), reducing break-even point (by raising prices, cutting variable or fixed costs), or both. The profit volume chart in Standard mode shows profit at 50%, 75%, 100%, 125%, and 150% of break-even — a quick visual of how much buffer you have.
Three levers reduce break-even — and pricing is the most powerful.
A 10% price increase on a 50% CM ratio product reduces break-even by ~17%. Every $1 price increase adds $1 to CM (fixed costs unchanged). Test price sensitivity carefully — some markets accept price rises readily; others are highly elastic.
Renegotiate supplier prices, reduce waste, improve production efficiency, or find cheaper inputs. Each $1 reduction in variable cost adds $1 to CM. This approach preserves volume while improving profitability.
Every $1 reduction in monthly fixed costs reduces break-even by 1 ÷ CM units. At $50 CM, cutting $1,000/month in fixed costs reduces break-even by 20 units. Review all fixed expenses annually — software subscriptions, insurance, and staffing are common areas.
Once you know your break-even, here are the practical applications.
Your break-even revenue is your minimum monthly revenue target. Set your sales goal above this — add your target profit to the calculation in Standard mode to see the units needed for any profit goal.
Before accepting a bulk discount or running a promotion, recalculate break-even at the lower price. A 15% discount on a 40% CM ratio product requires ~60% more volume just to maintain the same total profit. Use the calculator to sense-check every pricing decision.
Include break-even analysis in your business plan and budget. Lenders and investors want to know when a business becomes profitable. If you are starting a new business, estimate realistic sales volume relative to break-even to assess viability before committing capital.
The break-even formula, contribution margin, and how to use them
The break-even formula
Break-even units = Fixed Costs ÷ Contribution Margin per unit
Contribution margin (CM) = Selling price − Variable cost per unit
Break-even revenue = Break-even units × Selling price (or equivalently: Fixed costs ÷ CM ratio)
Example
Fixed costs: $10,000/month. Variable cost: $25/unit. Selling price: $75/unit. CM = $75 − $25 = $50/unit. CM ratio = $50/$75 = 66.7%. Break-even units = $10,000 ÷ $50 = 200 units/month. Break-even revenue = 200 × $75 = $15,000/month.
| Units sold | Revenue | Variable costs | Fixed costs | Profit/(Loss) |
|---|---|---|---|---|
| 100 | $7,500 | $2,500 | $10,000 | ($5,000) |
| 150 | $11,250 | $3,750 | $10,000 | ($2,500) |
| 200 BE | $15,000 | $5,000 | $10,000 | $0 |
| 250 | $18,750 | $6,250 | $10,000 | $2,500 |
| 300 | $22,500 | $7,500 | $10,000 | $5,000 |
Margin of safety
Margin of safety = Current units sold − Break-even units. This tells you how much sales can fall before you make a loss. Expressed as a percentage: (Current units − BE units) ÷ Current units × 100. A margin of safety of 20%+ is generally comfortable.
How to classify your business costs correctly for break-even analysis
Fixed costs
Fixed costs do not change with sales volume. They must be paid whether you sell zero or 10,000 units. Examples: rent, insurance, salaries of permanent staff, loan repayments, software subscriptions, accounting fees, and depreciation. These costs are the "overhead" that must be covered before any profit is made.
Variable costs
Variable costs change in direct proportion to sales volume. Every additional unit you sell incurs this cost. Examples: raw materials, cost of goods purchased for resale, per-transaction payment processing fees, freight and packaging per item sold, and sales commissions. In break-even analysis, variable costs are expressed per unit sold.
Semi-variable costs
Some costs are partly fixed and partly variable — for example, a base salary plus commission, or a fixed internet plan with overage charges. For break-even purposes, split these: put the fixed portion in fixed costs and the per-unit portion in variable costs.
| Cost type | Examples | In break-even formula |
|---|---|---|
| Fixed | Rent, salaries, insurance | Fixed costs ÷ CM = BE units |
| Variable | Materials, COGS, commissions | Subtracted from price = CM |
| Semi-variable | Base + bonus, tiered fees | Split into fixed and variable portions |
Three levers for reducing your break-even threshold
Lever 1: Raise prices
A price increase directly increases contribution margin. A 10% price rise on a 50% CM ratio product reduces break-even by approximately 17%. Warning: test price elasticity — some products lose volume when prices rise. The net effect on profit depends on how much volume you retain.
Lever 2: Reduce variable costs
Negotiate better supplier pricing, find cheaper raw materials, reduce packaging costs, or improve production efficiency. Every $1 reduction in variable cost adds $1 to CM per unit. Reducing variable costs from $25 to $20 on a $75 product (CM ratio: 73% vs 67%) reduces break-even from 200 to 167 units — saving 33 units/month.
Lever 3: Reduce fixed costs
Cut or eliminate fixed costs where possible: sublease unused space, renegotiate insurance, switch to pay-per-use software, reduce salaried headcount. Every $1,000/month reduction in fixed costs reduces break-even by $1,000 ÷ CM per unit. At $50 CM, that is 20 fewer units needed per month.
Combined impact example
Base case: $10,000 fixed, $25 variable, $75 price → BE = 200 units. Raise price to $80 (+$5) → BE = 182. Also cut fixed costs by $1,000 → BE = 164. Also reduce variable to $22 → BE = 156. Combined levers reduce BE by 22%.
Whether to include or exclude sales tax in your break-even figures
Use sales tax-exclusive figures
For break-even analysis, always use sales tax-exclusive figures — your selling price and costs before any sales tax is added. In the US, sales tax is added on top of the price at the point of sale, collected from the customer, and remitted to the state. It is not your revenue and not an expense — it passes straight through your books to the state department of revenue, so it never changes your break-even.
Example: a $75 product
Sell a product for $75 where your combined state-and-local sales-tax rate is 8%, and the customer pays $81 at checkout ($75 + $6 tax). You keep $75 and remit the $6 to the state — so use $75, not $81, in your break-even. Unlike VAT or GST overseas, US sales tax has no input credit: you do not reclaim sales tax on your own purchases, though goods you buy purely for resale are usually bought tax-free using a resale certificate.
When you must register to collect sales tax
There is no single national turnover threshold. Sales tax is administered state by state, and you register for a sales-tax permit (seller's permit) with each state's department of revenue where you have nexus — either a physical presence (an office, employees, or inventory in the state) or economic nexus. Since South Dakota v. Wayfair (2018), most states set economic nexus at $100,000 in sales or 200 transactions into that state in a year; below the threshold in a given state you generally don't collect that state's sales tax.
US sales tax — state-administered
Unlike the UK or Australia, the US has no federal VAT or GST. Sales tax is set and collected at the state level (and often county or city), with rates from 0% (Oregon, Montana, New Hampshire, Delaware) up to about 10% combined in many metro areas. Registration thresholds and taxable-goods rules vary by state — for your state's nexus rules and filing schedule, consult your state department of revenue.
Frequently asked Frequently asked questions
How do I calculate break-even for my US business?
Break-even units = Fixed monthly costs ÷ (Selling price − Variable cost per unit). At $10,000 fixed costs, $25 variable cost, and $75 selling price: break-even = $10,000 ÷ $50 = 200 units/month. Break-even revenue = 200 × $75 = $15,000/month. Use sales tax-exclusive figures in all calculations.
What is contribution margin?
Contribution margin = Selling price − Variable cost per unit. It is the amount each unit sold "contributes" toward covering fixed costs and generating profit. Once fixed costs are covered (at break-even), contribution margin becomes pure profit per unit. Expressed as a ratio: CM ÷ Price × 100 = CM%. A higher CM% means fewer sales are needed to cover fixed costs.
What is a good margin of safety for an US business?
A margin of safety of 20–30% above break-even is generally considered healthy for a stable business. This means sales would need to fall by 20–30% before you make a loss. Seasonal businesses or those in volatile industries should aim for higher margins of safety (30%+) to buffer slow periods. If your margin of safety is under 10%, a relatively small revenue drop could push you into loss.
How does sales tax affect break-even calculations?
Use sales tax-exclusive figures (prices and costs before sales tax) for break-even analysis. US state and local sales tax is collected from customers and remitted to your state department of revenue — it doesn't flow through P&L as expense or revenue. The rate varies by state and locality (0% in some states up to about 10% combined). Use the pre-tax sticker price in both your sales and cost figures so contribution margin reflects what the business actually keeps.
Where these figures come from
Business figures on this page are drawn from The IRS (business tax), the US Small Business Administration (loan & program rules), and The Federal Reserve (commercial interest-rate data).
- Federal corporate & business tax — IRS — Businesses.
- Self-employment tax (15.3%) — IRS — Self-Employment Tax.
- Pass-through & QBI deduction — IRS — Qualified Business Income Deduction.
- Small-business loans & SBA 7(a) — SBA — US Small Business Administration.
- Commercial lending rate data — Federal Reserve — H.15 Selected Interest Rates.
Last checked: April 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.