Comprehensive Calculator Guide
The break-even point is the number of units you must sell for revenue to cover all your costs, with no profit and no loss. Divide fixed costs by the gap between the selling price and the variable cost of one unit. A café with SAR 18,000 of monthly fixed costs that sells a cup for SAR 14 at a variable cost of SAR 5 must sell 2,000 cups a month before it makes any profit.
What the break-even point means
Each unit you sell brings in its price, but part of that goes straight to the cost of making or buying it. What is left is the contribution margin: the amount each unit adds toward fixed costs. In the café example it is 14 − 5 = SAR 9 per cup.
Fixed costs are paid whether you sell or not: rent, salaries, software subscriptions. If they total SAR 18,000 and each cup covers SAR 9, you need 18,000 ÷ 9 = 2,000 cups. Every cup after that adds SAR 9 of profit. The calculator rounds units up, because half a unit cannot be sold.
Fixed versus variable costs
Fixed costs stay the same for the period whatever you sell: rent, monthly salaries, internet, point-of-sale subscriptions, and licences or insurance spread over the months.
Variable costs come with every unit: raw materials, cups and packaging, delivery-app commission, card fees, and shipping if you pay it. Keep both sides for the same period, a month or a year.
Lowering your break-even point
Raising the price widens the margin. At SAR 15 a cup, the café's margin becomes SAR 10 and break-even falls from 2,000 to 1,800 cups, 10% fewer. Cutting variable or fixed costs works the same way. Test each scenario before deciding: one riyal can change the target by hundreds of units.
If you are VAT-registered, enter prices before VAT. The 15% you collect is passed on to the tax authority and is not revenue: a menu price of SAR 16.10 including VAT is SAR 14 to you.
How to Use
- 01Enter total fixed costs for the period you want, a month or a year.
- 02Enter the selling price per unit, before VAT.
- 03Enter the variable cost per unit: materials, packaging, commissions and payment fees.
- 04Read the units needed to break even in that period and the matching revenue; change any input to compare scenarios.
Formula Used
Break-even units = fixed costs ÷ (price − variable cost per unit), rounded up | Break-even revenue = units × pricePractical Examples
Example 1: a specialty café
Fixed costs SAR 18,000 a month, price SAR 14, variable cost SAR 5. Break-even = 18,000 ÷ 9 = 2,000 cups a month, about 67 a day, for revenue of SAR 28,000.
Example 2: raising the price by one riyal
The same café at SAR 15 a cup: 18,000 ÷ 10 = 1,800 cups, about 60 a day, for revenue of SAR 27,000.
Example 3: an online store
Fixed costs SAR 6,000 a month, price SAR 120, product plus shipping and fees SAR 75. Break-even = 6,000 ÷ 45 = 133.3, so 134 items, for revenue of SAR 16,080.
Important Tips
- If you run the business yourself, include a salary for yourself in fixed costs.
- Divide the monthly target by working days to get a daily number the team can track.
- For several products, use a contribution margin weighted by each product's share of sales.
Common Mistakes to Avoid
- Entering prices including VAT, which overstates the margin and understates the target.
- Mixing periods, such as yearly fixed costs against a monthly sales plan.
- Treating one-off set-up costs as monthly fixed costs; they are recovered after break-even, not part of it.
Frequently Asked Questions
- How do I find break-even revenue instead of units?
- Multiply break-even units by the price, which the calculator shows directly, or divide fixed costs by the contribution margin ratio: 18,000 ÷ (9 ÷ 14) = SAR 28,000.
- Why must the price be higher than the variable cost?
- Below that, every sale adds to the loss instead of covering costs, so no sales volume ever breaks even. The fix is in pricing or costs, not in volume.
- Is break-even the same as payback period?
- No. Break-even covers one period's costs. The payback period is how many months it takes to recover your initial investment from the profit made after break-even.
- Should I enter prices with or without VAT?
- Without, if you are VAT-registered: divide a VAT-inclusive price by 1.15. If you are not registered, the VAT you pay suppliers is a real cost, so include it.