Break-Even Analysis Template: Free, With Formula and Example

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What is a break-even analysis?

A break-even analysis compares two kinds of cost with what each sale brings in.

• Fixed costs stay the same whatever you sell in the period: rent, salaried staff, insurance, software, a lease.
• Variable costs rise with every unit you sell: ingredients, materials, packaging, shipping, sales commission, transaction fees.

Each sale first pays its own variable cost. What is left over, the contribution margin, goes toward the fixed costs. The break-even point is the number of sales at which those contributions add up to exactly the fixed costs. Below it you lose money. Above it every extra sale adds its full contribution to profit.

The break-even formula

Break-even point in units = fixed costs ÷ (price per unit minus variable cost per unit)

Break-even point in sales = fixed costs ÷ contribution margin ratio

The contribution margin ratio is the contribution per unit divided by the price. If a product sells for $12 and costs $5.40 to make, the contribution is $6.60 and the ratio is 55%.

Margin of safety = (expected sales minus break-even sales) ÷ expected sales

The margin of safety tells you how far sales can fall short of the plan before you start losing money. It is the number lenders and investors look for first, because it says how much room for error the plan has.

The 6 parts of a break-even analysis

1. The decision it supports. "Should we open the second kitchen?" A break-even figure with no decision attached is trivia.
2. Fixed costs, listed by line, with the period stated (a month, a quarter, a year).
3. Price and variable cost per unit, and the contribution margin they leave.
4. The break-even point in units and in sales.
5. Expected sales and the margin of safety.
6. Two or three what-if cases: a price change, a cost rise, a slower start. Then the recommendation.

A free break-even analysis template

Copy this into a document, or open one of the examples further down and edit it.

A worked example: a meal-prep kitchen

The figures below are an example, made up for this guide so the arithmetic is easy to check. Replace them with yours.

A small meal-prep business wants to move into its own kitchen. Its monthly fixed costs would be:

Each meal sells for $12 and costs $5.40 in ingredients, packaging and delivery. The contribution is $12 minus $5.40, which is $6.60 a meal, or 55% of the price.

Break-even in units: $9,300 ÷ $6.60 = 1,409.1, so 1,410 meals a month. You always round up, because 1,409 meals still leaves a small loss.

Break-even in sales: 1,410 meals × $12 = $16,920 a month.

The owner expects to sell 1,900 meals a month once the kitchen is running. The margin of safety is (1,900 minus 1,410) ÷ 1,900 = 25.8%. Sales could fall by about a quarter before the kitchen loses money.

Three what-if cases

The table tells the story in seconds. A $1 price rise cuts the break-even by 186 meals. A 10% rise in variable cost adds 125. If the owner can hold the price at $12 only by absorbing rising ingredient costs, the margin of safety drops below a fifth, and that is the risk to raise with the landlord's two-year lease on the table.

The recommendation then reads: "Sign the lease. At 1,900 meals the kitchen clears break-even with a 25.8% margin. Review the price in month three if ingredient costs rise more than 5%."

2 break-even analysis examples

1. A business case with payback

Edit this template

Break-even over time: the new system costs $1.4M and saves $720K a year, so it pays back in two years.

What to copy:

• Payback as its own row beside cost and saving. Payback is the break-even point measured in time instead of units.
• The "do nothing" option in the table, so the reader sees what waiting costs.
• One recommendation with a date to decide, the way every break-even analysis should end.

Edit for free: business case template.

2. A pricing decision

The pricing decision brief is the natural partner to a break-even analysis: once you know how the break-even moves with price, it lays out the options, what each one does to the numbers and the price you recommend.

Break-even analysis in a spreadsheet or on one page?

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Build the model in a spreadsheet, then put the answer on one page. If your costs already sit in a PDF or a slide deck, the free AI One-Pager generator reads a PDF, Word or PowerPoint file and gives it back as a designed One-Pager. Check every figure against your model before you share it.

How to do a break-even analysis in 5 steps

1. List every fixed cost for one period and add them up.
2. Work out the contribution per unit: price minus variable cost.
3. Divide fixed costs by the contribution, and round up.
4. Add expected sales and work out the margin of safety.
5. Test the what-ifs: a price change, a cost rise and a slower first few months.

For a business with several products, use a weighted average contribution based on the expected mix, or work out the break-even for each product line with its own share of fixed costs. For a service business, the "unit" is usually an hour billed or a client served.

Break-even analysis mistakes

• Putting a cost in the wrong group. Staff paid by the hour for every order are variable. A manager on a salary is fixed. Getting this wrong moves the break-even a long way.
• Rounding down. 1,409.1 meals means 1,410. Rounding down reports a break-even you have not reached.
• No margin of safety. "Break-even is 1,410" sounds fine until you learn expected sales are 1,450.
• One case only. Prices and costs move. Show at least the two cases most likely to hurt.
• Ignoring the start-up period. If it takes four months to reach expected sales, show the cash needed to cover the losses until then.

Make your break-even analysis

Open the free business case template and put in your own costs and payback, or drop your cost model into the free AI One-Pager generator and get a finished break-even analysis back.