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How much do you need to sell to avoid a loss? The break-even simulator
Three figures — fixed costs, price and cost per unit — are enough to know how many units you need to sell each month to cover your costs. Useful before offering a discount, hiring or presenting a project to investors.
Before setting a price, agreeing to a discount or hiring one more person, there is a question every SME should be able to answer off the top of its head: how much do I need to sell each month so as not to lose money? The CoRe Platform’s break-even simulator answers it with three figures, and it is free.
What it asks for and what it gives back
Three inputs:
- Monthly fixed costs — what you pay whether or not you sell anything: rent, fixed salaries, insurance, accountancy, software licences.
- Selling price per unit.
- Variable cost per unit — what each unit costs to produce or deliver: raw materials, packaging, commissions. This one is optional.
It returns the contribution margin (how much each unit leaves over to pay the fixed costs, in euros and as a percentage of the price), the number of units per month above which the business stops making a loss, and the break-even monthly revenue. If the price does not cover the variable cost, the tool tells you straight away that no break-even point is possible, because every sale adds to the loss.
An example
A small bakery with €6,000 of fixed costs a month sells a product at €12 that costs it €4.50 to make:
| Value | |
|---|---|
| Contribution margin | €7.50 (62.5%) |
| Units per month to break even | 800 |
| Break-even monthly revenue | €9,600 |
Three decisions where it makes a difference
- Discounts. In the same example, cutting the price to €11 (8.3% less) brings the margin down to €6.50 and pushes break-even up to 924 units, 15.5% more. A small price cut asks for almost twice as much in volume. It is worth running the simulator with the price before and after any promotion.
- Hiring and new fixed costs. With the margin in the example, every extra €750 a month in fixed costs means selling 100 more units. To find out what an employee really costs, including the employer’s TSU (social security contributions) and the holiday and Christmas allowances, the gives you the figure to put into fixed costs.
- Projects going to investors. A business plan without a break-even point leaves the investor to do the maths alone. Showing how many units are needed, and why it is realistic to sell them, is one of the first things asked when an opportunity is analysed.
Two things to watch when filling it in
- Price without VAT. The VAT charged to the customer is not the company’s revenue; it is passed on to the State. If the price goes in with VAT, the break-even point comes out lower than it really is.
- Several products with different margins. The calculation assumes a constant margin per unit. With a varied range, use an average margin weighted by each product’s share of sales, or run the simulator for each line separately. The tool itself shows this warning in the result.
A caveat
The break-even point tells you when sales cover costs, not when there is cash left in the bank. It does not include repaying loan principal, tax on profits or the time customers take to pay. A company can be above break-even and still run out of cash. For that other question, how many months the balance will last, there is the . The results are estimates built on simplified assumptions and do not replace the analysis of an accountant or advisor.
Why it matters to News readers
Most of the analyses we publish here deal with changes that affect an SME’s costs: the minimum wage, contributions, rents, energy, fees. The break-even point is the quickest way to turn each of those news items into a concrete question: how many more units do I need to sell each month to make up for it?