HOW TO USE IT
Build a useful base case
Enter fixed costs for the same period as your sales forecast. Use the net selling price and variable cost per unit on a consistent VAT basis. The contribution per unit is the amount left to cover fixed costs and profit.
Classify the inputs carefully
Fixed costs remain broadly unchanged across the forecast volume—for example, premises, core salaries or a recurring software contract. Variable costs arise with each sale, such as product cost, fulfilment or a transaction charge. If a cost changes in steps when capacity expands, test it separately rather than forcing it into one category.
Read the outputs in order
First check contribution per unit. If it is zero or negative, additional unit sales will not cover fixed costs under the current assumptions. Next, review break-even units and revenue. Finally, compare forecast sales with break-even to understand margin of safety. Break-even is the zero-profit threshold, not a sufficient target for investment, tax, owner pay or future risk.
A worked example
A product sold for £80 with £32 of variable cost contributes £48 per unit. With £12,000 of fixed costs for the same period, break-even is 250 units. Forecast sales of 300 units provide a 50-unit margin of safety and £2,400 of forecast operating profit before items excluded from the model.
Test a downside case
Download the base case, then reduce sales volume or contribution per unit. Comparing the two worksheets shows how much room the plan has before it reaches break-even. Change one assumption at a time so the cause of the movement remains clear.
Download and retain the assumptions
The CSV contains the entered figures and calculated outputs shown on screen. Give each scenario a clear filename and record the period, VAT basis and source of each important cost assumption. When opening the file in spreadsheet software, confirm that decimal and percentage formatting imported correctly.
Common mistakes
- Mixing annual fixed costs with monthly sales.
- Using VAT-inclusive revenue with VAT-exclusive costs.
- Leaving payment fees, delivery or sales commission outside variable cost.
- Treating the break-even threshold as the desired profit target.
Continue the decision
Use the full Break-even Calculator for saved scenarios, or connect the result to the Pricing Calculator and Cash Flow Forecast Calculator. Browse both downloads in the free template library.
The worksheet is a planning aid, not accounting or financial advice. Method reviewed 5 August 2026.