Units and revenue needed to cover fixed costs.
Break-even units
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Contribution per unit
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Break-even revenue
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VAT-inclusive price
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Your breakdown
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Contribution is the engine, not profit
Break-even analysis trips people up because the instinct is to think in terms of profit per sale. The number that actually matters is contribution, the slice of each sale left over after you pay the variable cost of producing that one unit. That leftover is what chips away at your fixed costs. Until your accumulated contribution equals your fixed costs, the business is running at a loss no matter how busy it looks. The moment the two are equal, you have broken even, and every sale after that drops its full contribution to the bottom line.
This tool does exactly that. It subtracts your variable cost per unit from your selling price to get the contribution per unit, then divides your fixed costs by that contribution to find how many units you must sell. Multiply by the price and you get the revenue you need to be standing still. If the price is at or below the variable cost, the contribution is zero or negative and the tool tells you break-even is simply not reachable, because you lose money on every unit and selling more only deepens the hole.
A KES 500,000 fixed-cost example
Picture a small business with KES 500,000 of monthly fixed costs, things like rent, salaries, and a software subscription that do not move with sales volume. It sells a product at KES 2,000 each, excluding VAT, and each unit costs KES 1,200 in materials and direct labour. Here is the path to break-even:
So you must move 625 units, worth KES 1,250,000 in sales, before the business covers its costs. The chart below shows fixed costs as a flat line and total contribution climbing with units, the crossing point being break-even.
Where VAT fits, and where it does not
A frequent mistake among Kenyan traders is doing the break-even sum on the VAT-inclusive shelf price. Do not. The 16 percent VAT this calculator uses is not your money. If you are VAT-registered you collect it on behalf of the Kenya Revenue Authority and remit it, so it never contributes to covering your costs. Run the break-even on prices net of VAT, which is why the price input here is the figure before VAT. The tool still shows you the VAT-inclusive price of KES 2,320 separately, because that is what the customer actually pays at the till and it matters for how your pricing lands in the market.
VAT registration in Kenya becomes compulsory once taxable turnover passes a threshold, the figure modelled across this site being KES 5,000,000 over any twelve months. Below that you may not be charging VAT at all, in which case your net and gross prices are the same and the VAT-inclusive figure here is just informational. Because the standard rate and the registration threshold can shift with each Finance Act, confirm both with the KRA before building them into a pricing decision.
Reading the result like an owner
Two levers move break-even faster than anything else, and neither is selling more. Lifting the price or trimming the variable cost both widen the contribution per unit, and because contribution is the divisor, a small change there shifts the break-even point sharply. Knock KES 200 off the variable cost in the example and contribution jumps to KES 1,000, dropping break-even from 625 units to 500. Compare that with cutting fixed costs, which moves the target proportionally but often takes longer to arrange. A sensible habit is to treat the break-even units as your monthly floor, then ask how many days of trading that implies, so the number stops being abstract and becomes a daily sales target you can actually manage against.
Should I include my own salary as a fixed cost?
If you draw a regular amount to live on, yes, include it in fixed costs, otherwise your break-even point will flatter the business by ignoring the money you need to take out. Many founders leave themselves out and then wonder why a technically break-even month leaves them personally short. Put a realistic owner drawing into the fixed-cost figure and the target becomes honest.
What if I sell several products at different margins?
This tool assumes a single product or a representative average unit. For a mixed range, the cleaner approach is a weighted average contribution, where you blend the contribution of each product by its share of sales, then divide fixed costs by that blended figure. If your mix swings heavily between high and low margin lines, run the calculator separately for your main sellers to see how each one carries the fixed costs.