The number that decides whether a month works
Break-even is the point where contribution finally equals fixed costs. Below it you are funding the business from reserves. Above it, each additional sale contributes its full margin straight to profit.
The concept people miss is contribution: not the profit on a unit, but what is left after variable costs and before fixed costs. That is the amount doing the work of paying your rent.
The formula
Break-even units = Fixed costs ÷ Contribution per unit
Break-even revenue = Break-even units × Price
Worked example
₹2,00,000 fixed, ₹1,500 price, ₹900 variable
- Contribution per unit
- ₹600
- Contribution margin
- 40.00%
- Break-even units
- 334
- Break-even revenue
- ₹5,01,000
- Units per working day
- 13
Thirteen units a working day. That is a far more useful management number than "₹5 lakh of revenue", because it is something a team can actually aim at.
Sorting fixed from variable
| Fixed | Variable |
|---|---|
| Rent and utilities | Raw materials |
| Salaries on payroll | Payment gateway fees |
| Software subscriptions | Shipping and packaging |
| Insurance | Sales commission |
| Accounting retainer | Per-order contractor pay |
Misclassifying a cost distorts everything downstream. Treating commission as fixed, for example, makes break-even look lower than it is.
Moving the number
- Raise the price. The fastest lever, because contribution rises rupee for rupee.
- Cut variable cost. Slower, but it improves every future sale too.
- Cut fixed cost. Reduces the target directly and permanently.
- Shift the mix. Selling more of your highest-contribution product moves break-even without changing any single price.
Frequently asked questions
What is a contribution margin?
The share of the selling price left after variable costs. At a ₹1,500 price and ₹900 variable cost, contribution is ₹600 — a 40% margin.
Should I include my own salary in fixed costs?
Yes, if you take one. A break-even that ignores the founder's pay is not a real break-even.
What if I sell several products?
Use a weighted average contribution across your typical sales mix, or run each product line separately.