Break-even, in one idea
You break even when total revenue covers total cost. Split cost into fixed (rent, salaries, tooling — the same whether you sell one unit or a thousand) and variable (materials, shipping, transaction fees — per unit). Each unit sold contributes its price minus its variable cost toward covering the fixed costs; that difference is the contribution margin. Divide the fixed costs by the contribution per unit and you get the number of units to break even:
break-even units = fixed costs / (price − variable cost)
At $10,000 fixed, a $25 price, and $15 variable cost, each unit contributes $10, so you break even at 1,000 units — $25,000 in revenue. If the price does not exceed the variable cost, you lose money on every sale and never break even at any volume, which the calculator flags rather than dividing by a negative number.
Margin and markup are not the same
This is the pricing mistake that costs small businesses real money. Both describe the same profit, but against different bases:
- Margin = profit / price — profit as a share of what the customer pays.
- Markup = profit / cost — profit as a share of what you paid.
Buy something for $60 and sell it for $100: the $40 profit is a 40% margin (40/100) but a 66.7% markup (40/60). They are always different numbers, and the gap grows as profit rises. The trap: adding a "50% markup" to a $60 cost gives $90 — only a 33% margin, not the 50% you might have expected.
| Markup | Resulting margin |
|---|---|
| 10% | 9.1% |
| 25% | 20.0% |
| 50% | 33.3% |
| 100% | 50.0% |
| 200% | 66.7% |
To hit a target margin, work backward: required price = cost / (1 − margin). A 40% margin on a $60 cost needs a $100 price — which this calculator computes directly.
Related tools: the APR/APY calculator for financing costs, and the Kelly criterion calculator for sizing risk once you know your edge.