Break-Even Analysis: Worked Examples for Small Businesses
Break-even analysis is the most decision-dense math in small business: three inputs that tell you whether a price, a product or a storefront is viable. Here are three worked examples showing how it changes decisions.
- Break-even units = fixed costs ÷ (price − variable cost per unit).
- Small margin improvements move the break-even point far more than intuition suggests.
- A product with a negative contribution margin cannot be fixed by volume — only price or cost.
Example 1: the coffee cart
Fixed costs: $4,500/month (cart lease, permits, insurance, your base draw). A latte sells for $5.50; beans, milk, cup and payment fees run $1.70. Contribution margin: $3.80.
Break-even: $4,500 ÷ $3.80 = 1,185 lattes a month — about 40 a day. Now the question is empirical, not hopeful: does this corner see 40 latte buyers a day? Raise the price 50 cents and the requirement drops to ~1,058, or 35 a day. The analysis converts a business plan into a countable daily number.
Example 2: the SaaS side project
Fixed costs: $800/month (hosting, tooling, insurance). Price: $15/month per customer. Variable cost per customer: $2 (support load, payment fees, infra share). Margin: $13.
Break-even: 62 customers. That reframes the project: it is not 'can I build it' but 'can I find 62 paying users.' If the honest answer is no at $15, the options are a higher price (break-even 50 customers), lower fixed costs, or no project — all better discovered before the build.
Example 3: the negative margin trap
A reseller buys at $22 and sells at $24, with $3 of shipping and fees per order. Contribution margin: −$1. Every sale loses a dollar, and volume makes it worse, not better.
No sales target fixes a negative margin. The only levers are price up, cost down, or kill the product. Break-even analysis makes this visible in one calculation instead of six months of losses.
The discipline
Compute break-even, then add a 20–30% safety margin and treat that as the real monthly target — breaking even covers costs, not founder pay or bad months. Our break-even calculator runs the numbers instantly and shows the daily unit requirement.
Try the calculators
Break-Even Calculator
Find the exact point where a product stops losing money: enter fixed costs, your price per unit and the variable cost of making each unit.
Profit Margin Calculator
Enter revenue, cost of goods sold and operating expenses to see gross profit, gross margin, net profit and net margin — the two numbers that describe a business’s health.
Frequently asked questions
Does marketing spend count as fixed cost?
Committed campaigns (a salaried marketer, a monthly retainer) are fixed; pure performance spend that scales with sales is effectively variable. Classify consistently.
What if my margin is negative?
No volume fixes it. Raise price, cut unit cost, or drop the product — break-even math only works when price exceeds variable cost.