Break-Even Analysis for Small Businesses
Break-even analysis estimates how many units or how much revenue is needed to cover costs before profit begins.
Core inputs
- Fixed costs
- Variable cost per unit
- Sales price per unit
- Expected sales volume
Contribution margin
The contribution margin is the amount left from each sale after variable costs. That amount contributes toward fixed costs and then profit.
Why it is useful
Break-even analysis can support pricing, staffing, equipment, and marketing decisions, but it should be paired with cash-flow planning and realistic demand assumptions.