--- title: "Break-Even Analysis: How Much Must You Sell? | MCC Solutions" description: "Learn to calculate break-even sales using fixed costs and contribution margin, with a worked example and ways to use the result in decisions." url: "https://mcc-solutionsnj.com/bookkeeping/guides/break-even-analysis-for-small-business" --- Bookkeeping guide · Updated October 12, 2026 # Break-Even Analysis: How Much Must You Sell? Break-even is the sales level where revenue exactly covers all costs, leaving neither profit nor loss. Knowing your number turns vague worries about whether the business is doing enough into a clear target you can plan around. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** Break-even is the sales level where revenue exactly covers all costs. Separate fixed costs (rent, insurance, salaried pay, software, loan payments) from variable costs (materials, shipping, card fees, commissions), then work out how much you must sell to cover both. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [NJ 1099 contractor rule (ABC test)](/bookkeeping/guides/nj-independent-contractor-rule-abc-test-2026) · [Trial balance explained](/bookkeeping/guides/trial-balance-explained) · [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) **Free tools:** [ROI and payback calculator](/bookkeeping/roi-and-payback-calculator) · [Net profit margin calculator](/bookkeeping/net-profit-margin-calculator) [Run your own numbers in the break-even calculator](/bookkeeping/break-even-calculator). [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Fixed and variable costs Fixed costs stay the same whatever you sell in a month: rent, insurance, salaried pay, software, loan payments. Variable costs rise with each sale: materials, shipping, card fees, commissions. Some costs are mixed, such as utilities, and need to be split by judgment. Your profit and loss from the books is the starting point. Go line by line and decide which type each is. ## Contribution margin Each sale leaves something after its variable cost. That amount is the contribution toward fixed costs. As a percentage of sales, it is the contribution margin. If variable costs are thirty-five percent of sales, the contribution margin is sixty-five percent. It is similar to gross margin, but it counts all variable costs, not just the ones labeled as cost of goods. ## The formula Break-even sales equal fixed costs divided by the contribution margin percentage. If fixed costs are twenty thousand a month and the contribution margin is sixty-five percent, break-even sales are about thirty thousand eight hundred. Below that you lose money, above it you earn it. For a product business, you can also express it in units: fixed costs divided by contribution per unit. ## Include your own pay and debt A break-even that ignores owner pay and loan principal is misleading. Principal is not an expense, but it must be paid from cash. Add it to the fixed amount if you want a cash break-even, and add a reasonable owner salary. That version tells you the sales you need to actually survive. Compare both versions: the accounting figure and the cash figure. ## Using the number Break-even helps with hiring, price changes and new leases. If a new hire adds a fixed cost, divide it by your contribution margin to see the extra sales required. If a price rise increases the contribution margin, the break-even point falls. Test what happens if sales dip. How far above break-even are you now? That cushion is your margin of safety, and it shows how much risk you carry. ## Keep it current Costs and margins shift. Recalculate each quarter, or when you make a major change. Seasonal businesses should use annual figures and monthly versions. Treat the result as an estimate. Real life has discounts, waste and timing. Still, an approximate break-even is far better than none. A small studio has fixed costs that include rent, insurance, software and the owner's modest pay. Its variable costs are materials and card fees. The break-even calculation shows it needs a certain number of clients per month. The owner then considers hiring an assistant. Dividing the assistant's cost by the contribution per client shows exactly how many extra clients are needed to pay for the hire. The decision becomes a question of marketing capacity, not a guess. ## Common questions **Is break-even the same as profit?** No. At break-even, profit is zero. **Do I include taxes?** Income taxes are usually separate. Include payroll and sales-based costs. Ask your CPA about tax planning. **How often should I recalculate?** Quarterly, and whenever a major cost or price changes. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Xero Bookkeeping and reconciliation in Xero for New Jersey small businesses, including cleanup and moving from spreadsheets or another program. Xero →](/bookkeeping/software/xero) More guides - [Receipts and Documentation: Habits That Save Tax Time](/bookkeeping/guides/expense-receipts-and-documentation-habits) - [Reimbursing Owners and Employees for Business Costs](/bookkeeping/guides/reimbursing-owners-and-employees-correctly) - [Vendor Statement Reconciliation for Accounts Payable](/bookkeeping/guides/vendor-statement-reconciliation) - [Job Costing for Service Businesses and Contractors](/bookkeeping/guides/job-costing-for-service-businesses) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Excel workbook ### Break-Even and Pricing Workbook Enter your fixed costs and what each product or service costs and sells for, then see the sales you need and the price that reaches your target margin. [See what is inside ($24)](/toolkits/break-even-and-pricing-workbook) [Try the free starter](/toolkits/break-even-and-pricing-workbook#free-starter) Also in the [Business Planning Bundle](/toolkits/business-planning-bundle): 4 products for $79 instead of $106 separately. Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)