Break-Even Calculator

What "break-even" really tells you

Your break-even point is the moment a venture stops costing you money and starts earning it — the exact number of sales where revenue finally covers every cost, leaving zero. One sale past it, you're in profit. One short, you're funding the difference yourself. It sounds basic, but most people running a small operation have never put a hard number on it, which means they're flying without the single most useful figure in their business.

The idea behind the number: contribution

The whole calculation hinges on one concept — contribution. Every sale brings in a price, and every sale costs something to deliver. What's left over contributes toward your fixed costs. Charge $1,500 for a project that costs you $300 in subcontracting and fees, and each project contributes $1,200. Stack up enough of those $1,200 contributions to cover your fixed overhead, and you've broken even. That's all the formula is doing:

• Contribution per sale = price − variable cost
• Break-even sales = fixed costs ÷ contribution per sale
• Break-even revenue = fixed costs ÷ contribution-margin ratio

A worked example

Imagine your fixed costs are $3,000 a month — software, a co-working desk and the baseline pay you need to live. You charge $1,500 a project, and each project costs about $300 to deliver. Each one contributes $1,200, so you break even at $3,000 ÷ $1,200 = 2.5 projects — round up, and you need 3 projects a month to stop losing money, which is $3,750 of billings. Want to clear $4,000 of profit on top? Now you need ($3,000 + $4,000) ÷ $1,200 = 5.83, so 6 projects a month. Suddenly "I'll just pick up a bit of work" has an actual target attached.

How freelancers should read this

The textbook version of break-even is written for factories, but it maps cleanly onto solo work once you translate the words. Your fixed costs aren't just software — the biggest one is usually the income you need to draw to live, so include it. Your price is your typical project value or your hourly rate. Your variable cost is whatever you pay out per job: subcontractors, stock photography, processing fees. Pure-service freelancers often have a near-zero variable cost, which makes almost the whole price contribution — and the break-even point lands purely on how many billable hours cover your overhead. If you haven't set that rate deliberately yet, the hourly rate calculator is the place to start, and the margin & markup calculator helps you check the contribution on a single job.

Margin of safety: the question after break-even

Once you know your break-even, the useful follow-up is how much cushion you have above it. If you break even at 3 projects and you're booking 5, two of those projects are pure margin of safety — the room you'd lose before you slipped back into the red. The wider that gap, the more a quiet month or a lost client stings less. A break-even number sitting uncomfortably close to your actual volume is an early warning worth acting on before the slow season, not during it.

Assumptions and limitations

• Costs are split cleanly into fixed and variable. Reality is messier — some costs are "stepped" (you add a tool only past a certain volume). Re-run the numbers when a step changes.
• One average price and cost. If you sell a mix at different prices, use a sensible average, or run the calculator separately for each line.
• Same period throughout. Keep fixed costs, price and the profit target on the same clock — all monthly or all yearly — or the answer is meaningless.
• Pre-tax. The profit target is before income and self-employment tax. To plan the tax on top, see the self-employment tax calculator.

Frequently asked questions