Break-even analysis: Formula and how to calculate it (2026 guide)

Key Takeaways:

• A break-even analysis tells you exactly how many units you need to sell (or how much revenue you need to earn) before your business starts making a profit.

• You can use it to set prices, test new product ideas, plan for expansion, and assess financial risk before committing money.

• Reducing your banking and international payment costs is one of the fastest ways to lower your break-even point. Airwallex helps Singapore businesses cut these costs with no-fee accounts and competitive FX rates.

A break-even analysis helps you understand when your business will start making a profit.

By comparing your fixed costs, variable costs, and sales revenue, it shows exactly how much you need to sell before you cover your expenses.

Whether you're launching a new product, reviewing your pricing, or planning your next stage of growth, a break-even analysis helps you make more informed financial decisions.

In this guide, we'll explain what a break-even analysis is, how to calculate it, and how businesses in Singapore can use it to improve pricing, manage costs, and increase profitability.

What is a break-even analysis?

A break-even analysis is a financial calculation that tells you the point at which your total revenue equals your total costs. At this point, called the break-even point (BEP), your business is neither making a profit nor running at a loss.

To perform a break-even analysis, you need three numbers:

1. Your fixed costs

2. Your variable costs per unit

3. Your selling price per unit

From these, you can calculate exactly how many units you need to sell each month to cover all your expenses.

Break-even analysis is used across all types of businesses, from retail shops and F&B outlets to SaaS startups and service providers. It is one of the most practical tools in financial planning because it turns abstract cost structures into a concrete sales target.

What is the break-even point?

The break-even point is the specific unit volume or revenue figure at which your business covers all its costs. Below it, you are making a loss. Above it, you are making a profit.

There are two ways to express your break-even point:

1. Break-even point in units: the number of products or services you need to sell to cover all costs.

2. Break-even point in sales revenue: the total dollar value of sales needed to cover all costs. This is useful when you sell multiple products at different price points and cannot easily track a single unit volume.

Both are calculated using the same core inputs. The next section covers the formula and walks through both calculations with examples.

Understanding your costs

Before you can calculate your break-even point, you need to understand two types of costs: fixed costs and variable costs. Getting these right is the foundation of an accurate break-even analysis.

Fixed costs

Fixed costs are expenses that stay the same regardless of how much you produce or sell. You pay them whether you sell one unit or one thousand. Common fixed costs for Singapore businesses include:

• Office or retail space rental

• Staff salaries

• Insurance premiums

• Software subscriptions

• Loan repayments

• Accounting and legal fees

Fixed costs are straightforward to identify: if the bill arrives every month at roughly the same amount, it is likely a fixed cost.

Variable costs

Variable costs change in direct proportion to your sales volume. The more units you produce or sell, the higher your variable costs. Common variable costs include:

• Raw materials or inventory

• Packaging and shipping

• Payment processing fees

• Sales commissions

• Import duties on goods

If a cost only occurs when you make a sale, it is almost certainly a variable cost.

Contribution margin

The contribution margin is the amount left over from each sale after you subtract the variable cost to produce it. It is the portion of each sale that contributes toward covering your fixed costs, and eventually, toward profit.

The formula is:

Contribution margin = Selling price per unit − Variable cost per unit

For example: if you sell a product for S$80 and it costs S$30 in variable costs to produce and deliver, your contribution margin is S$50. Each sale puts S$50 toward your fixed costs.

The contribution margin is a critical input in the break-even formula.

A higher contribution margin means you need to sell fewer units to break even. A lower one means you need to sell more. This is why pricing decisions and cost control both have a direct impact on your break-even point.

How to calculate your break-even point

Once you know your fixed costs, variable costs, and selling price, you can calculate your break-even point using a simple formula. There are two versions: one for units, one for revenue.

Break-even point in units

Here’s the formula for your break-even point in units:

Break-even point (units) = Fixed costs ÷ Contribution margin per unit

Or written in full:

Break-even point (units) = Fixed costs ÷ (Selling price per unit − Variable cost per unit)

Say you run a small business selling phone chargers online. Here are your numbers:

• Fixed costs: S$10,000 per month (rent, salaries, software)

• Selling price per unit: S$50

• Variable cost per unit: S$20 (materials, packaging, shipping)

First, calculate the contribution margin:

S$50 − S$20 = S$30 contribution margin per unit

Then calculate the break-even point:

S$10,000 ÷ S$30 = 334 units per month

You need to sell 334 chargers every month before your business starts making a profit. Every unit sold above that number contributes directly to your bottom line.

Break-even point in sales revenue

If you sell multiple products at different price points, calculating a unit-based break-even point gets complicated. In that case, use the revenue-based formula instead.

First, you need your contribution margin ratio:

Contribution margin ratio = Contribution margin per unit ÷ Selling price per unit

Then:

Break-even point (revenue) = Fixed costs ÷ Contribution margin ratio

Using the same charger business:

• Contribution margin ratio = S$30 ÷ S$50 = 0.60 (or 60%)

• Break-even point (revenue) = S$10,000 ÷ 0.60 = S$16,667 per month

This means you need to generate S$16,667 in monthly revenue to cover all your costs. This figure is useful when you are reporting sales in dollar terms rather than unit volumes.

When to use a break-even analysis

A break-even analysis is not a one-time exercise. There are several situations where youcan use this analysis:

1. Starting a new business

Before you launch, a break-even analysis tells you whether your business model is viable. It forces you to map out all your costs and test whether your pricing can realistically cover them at an achievable sales volume.

If the number of units you need to sell feels unreachable, that is a signal to rethink your costs, your price, or both.

2. Launching a new product

Every new product carries its own cost structure. A break-even analysis lets you calculate the minimum sales volume needed to justify the launch.

If the number is higher than what your market can realistically support, you may need to adjust the price, reduce production costs, or reconsider the launch altogether.

3. Changing your prices

Pricing decisions directly affect your contribution margin, which in turn shifts your break-even point.

If you’re considering a price increase to protect margins (or a price cut to stay competitive), run a break-even analysis first. It will show you exactly how the change affects the number of units you need to sell.

4. Planning an expansion

Opening a new location, hiring additional staff, or investing in new equipment all increase your fixed costs.

A break-even analysis shows you how much additional revenue you need to generate to absorb those costs, and how long it might take to get there.

5. Seeking funding

Banks, investors, and government grant bodies in Singapore often ask for financial projections before approving funding. A break-even analysis is a standard part of this package.

It demonstrates that you understand your cost structure and have a clear path to profitability, which builds confidence with lenders and investors alike.

If you are applying for an ACRA-registered business loan or an Enterprise Singapore grant, having this analysis ready will strengthen your application.

How to lower your break-even point

Once you know your break-even point, the next question is how to reach it faster, or how to reduce it so your business becomes profitable at a lower sales volume.

There are three levers you can pull: increase your selling price, reduce your fixed costs, or reduce your variable costs. Most businesses use a combination of all three.

Option 1: Increase your selling price

Raising your price increases your contribution margin, which means each sale covers more of your fixed costs. This is the fastest way to lower your break-even point, but it only works if your market can absorb the increase without a significant drop in sales volume.

Using the charger example from earlier: if you raise the selling price from S$50 to S$60 while keeping costs the same, your contribution margin rises from S$30 to S$40.

S$10,000 ÷ S$40 = 250 units per month

That translates into 84 fewer units you need to sell each month to break even.

Option 2: Reduce your fixed costs

Fixed costs are often easier to cut than variable costs because they are within your direct control. Review every recurring expense and ask whether it is essential.

Common areas where Singapore businesses find savings:

• Renegotiating office leases or switching to a co-working arrangement

• Consolidating software subscriptions

• Outsourcing functions like accounting or HR instead of hiring full-time staff

• Switching to a business account with no monthly fees: Airwallex's Business Account charges no account fees and no monthly fees on the Explore tier, which directly reduces your fixed cost base

Learn more about Airwallex’s Business Account or sign up now.

Option 3: Reduce your variable costs

Lower variable costs increase your contribution margin without touching your selling price. This is particularly effective for product businesses where materials, shipping, or payment processing make up a significant share of unit costs.

Here are some ways to reduce variable costs:

• Negotiate better rates with suppliers as your order volume grows

• Optimise packaging to reduce shipping costs

• Review payment processing fees — high per-transaction fees quietly erode your contribution margin on every sale

• If you pay overseas suppliers, reduce the FX costs on each transfer. International payment fees and poor exchange rates are a hidden variable cost that many businesses underestimate. Airwallex's international transfers are charged at competitve rates of 0.4% to 0.6% above interbank, saving you up to 80% on FX fees compared to traditional banks. 

Learn more about Airwallex Transfers or sign up now.

Option 4: Run what-if scenarios

The real power of a break-even analysis is the ability to test decisions before you make them. Before changing a price, signing a new lease, or taking on a supplier contract, plug the new numbers into your break-even formula and see how the outcome shifts.

For example, here’s a simple what-if table for the charger business:

Running these scenarios takes minutes and can prevent months of trading at a loss.

Limitations of break-even analysis

A break-even analysis is a useful planning tool, but it works with simplified assumptions. Understanding where it falls short helps you use it more accurately:

1. It assumes costs are static

The formula treats fixed and variable costs as constants. In reality, costs shift. Rent increases at lease renewal. Supplier prices change. Staff costs rise.

A break-even analysis is a snapshot based on your current numbers; you need to rerun it whenever your cost structure changes significantly.

2. It assumes you sell everything you produce

The formula assumes that every unit you produce gets sold. It does not account for unsold inventory, returns, or wastage. For product businesses with unpredictable demand, this can make the break-even point look easier to reach than it actually is.

3. It does not account for mixed product lines

The standard formula works cleanly when you sell a single product at one price. If you sell multiple products with different margins, you need to calculate a weighted average contribution margin, or run a separate analysis for each product. 

Using a blended average can mask the fact that some products are dragging your overall margin down.

4. It ignores cash flow timing

Breaking even on paper does not mean you have enough cash in the bank to keep operating. A business can be break-even on an income statement while still running out of cash: for example, if customers pay on 60-day terms but suppliers require upfront payment.

Break-even analysis should always be read alongside a cash flow forecast, not as a substitute for one.

5. It does not tell you whether the business is viable long-term

Reaching break-even is a milestone, not a destination. A business that perpetually operates just above its break-even point has no margin for error: any dip in sales or rise in costs tips it back into loss.

Break-even analysis tells you the minimum threshold for survival, not the level of sales needed for a healthy, sustainable business.

How Airwallex helps lower your break-even point

Reaching your break-even point faster often comes down to reducing your fixed and variable costs. Airwallex helps Singapore businesses do both by lowering business banking costs and international payment expenses. Here’s what you get with Airwallex:

Reduce fixed costs with a free business account

Monthly banking fees increase your fixed costs before you've made a single sale.

On the Explore plan, Airwallex's business account has no monthly account fees, helping eligible businesses keep recurring banking costs low and reduce their break-even point.

Reduce variable costs on international payments

If you pay overseas suppliers or contractors, international transfers become part of your variable cost base.

Airwallex offers international transfers with FX rates from 0.4%–0.6% above interbank, saving you up to 80% on FX fees compared to traditional banks. You also get free transfers to 120+ countries via local rails, with no SWIFT fees.

Accept payments from customers worldwide

As your business grows, collecting payments from customers in multiple markets becomes just as important as paying suppliers overseas. Airwallex lets businesses accept online payments in 130 currencies via 160+ local payment methods from a single platform.

Frequently asked questions (FAQs)

What is a break-even analysis in simple terms?

A break-even analysis calculates the point at which your total revenue equals your total costs,  meaning your business is neither making a profit nor a loss. It tells you exactly how many units you need to sell, or how much revenue you need to generate, before your business becomes profitable. It is one of the most practical tools for financial planning because it turns your cost structure into a concrete sales target.

What is a good break-even point?

A good break-even point depends on your industry, business model, and market size. What matters is whether your break-even point is realistically achievable given your sales capacity. As a general rule, the lower your break-even point relative to your maximum possible sales volume, the more financial resilience your business has. A business that breaks even at 20% of capacity has far more room to absorb setbacks than one that needs to operate at 80% capacity just to cover costs.

How often should I run a break-even analysis?

Run a break-even analysis whenever your cost structure or pricing changes: for example, when you renew a lease, take on new staff, launch a product, or adjust your prices. At a minimum, revisit it once a year. Many businesses also run one before any significant investment decision, such as opening a new location or entering a new market.

What is the difference between break-even point and profit?

The break-even point is where revenue covers all costs, meaning profit is zero. Profit only begins above the break-even point, when each additional sale contributes directly to your bottom line. The gap between your actual sales volume and your break-even point is called the margin of safety — it tells you how much your sales can fall before your business starts losing money.

Can break-even analysis be used for service businesses?

Yes. Service businesses can apply the same formula using billable hours or project fees in place of units. Your fixed costs remain the same (rent, salaries, software) and your variable costs per unit of service might include contractor fees, materials, or travel. The contribution margin and break-even point work the same way regardless of whether you are selling a physical product or a service.

Does break-even analysis include tax?

Standard break-even analysis is typically calculated on a pre-tax basis, meaning it does not account for corporate income tax. This gives you a clean picture of your operating cost structure. Once you are consistently trading above your break-even point, factor in your Singapore corporate tax obligations to understand your true net profitability.