Break-Even Analysis: How Many Sales Before You Make a Profit?

How many candles does a small candle maker need to sell each month before the business stops losing money? It sounds like a question you'd answer by feel, but it has an exact answer, and working it out tells you a lot more than one number. It shows which costs matter, how much room your price gives you, and what happens if you change it.

This guide works through one example from start to finish. The business is invented, but the method is the same for a freelancer, a market stall, an online shop or a café. You can follow along in the Break-Even Calculator.

Step 1: List the costs that don't change with sales

Fixed costs are the bills you pay each month whether you sell one candle or a thousand. For our candle maker they are:

• Share of a studio: $900
• Market stall fees: $480
• Equipment repayment: $150
• Website and software: $110
• Phone and internet (business share): $90
• Insurance: $70

That's $1,800 a month. Be honest with this list. Leaving out a cost doesn't make it go away; it just makes the break-even point look lower than it is.

Step 2: Work out the cost of each extra sale

Variable costs rise with every unit you sell. For one candle:

• Wax: $3.20
• Jar: $2.10
• Fragrance oil: $1.80
• Wick and label: $0.60
• Packaging: $0.50
• Card payment fee: about $0.80

That's $9.00 per candle. Card fees are usually a percentage of the sale, so they'd change slightly with the price; we've kept the fee fixed here to keep the example simple.

Step 3: Find what each sale contributes

The candles sell for $24. Each sale first has to pay for its own materials, and whatever is left goes towards the fixed costs. That leftover is the contribution margin:

$24 − $9 = $15 per candle.

As a share of the price, that's $15 ÷ $24 = 62.5%. Out of every dollar of sales, 62.5 cents go towards fixed costs and, once those are covered, profit.

Step 4: Divide to find the break-even point

Break-even units = fixed costs ÷ contribution per unit = $1,800 ÷ $15 = 120 candles a month.

In sales terms, that's 120 × $24 = $2,880. You can also get there from the percentage: $1,800 ÷ 0.625 = $2,880. Both routes give the same answer, which is a handy check.

Here's what break-even means in practice. At 120 candles, sales of $2,880 pay for $1,080 of materials (120 × $9) and the $1,800 of fixed costs, leaving exactly nothing. The 121st candle is the first one that makes a profit, and it makes $15.

When the answer isn't a whole number, round up. Selling a fraction of a candle isn't possible, and rounding down would leave a small loss.

Step 5: Add the profit you actually want

Breaking even pays the bills but not the owner. If the candle maker wants $1,500 a month of profit, that amount is treated like an extra fixed cost:

($1,800 + $1,500) ÷ $15 = 220 candles, or $5,280 of sales.

This is often the more useful number. It turns "I'd like to earn $1,500 a month from this" into a concrete sales target you can measure every week: about 55 candles.

What moves the break-even point?

Four levers change the answer. Here's each one on its own, starting from 120 candles:

• Raise the price by $3, to $27. Contribution goes up to $18, and break-even falls to $1,800 ÷ $18 = 100 candles ($2,700 of sales).
• Cut variable costs by $1, to $8. Contribution goes up to $16, and break-even falls to 112.5, so 113 candles.
• Cut fixed costs by $300, to $1,500. Break-even falls to $1,500 ÷ $15 = 100 candles ($2,400 of sales).
• Cut the price by $3, to $21. Contribution drops to $12, and break-even rises to $1,800 ÷ $12 = 150 candles.

The last line deserves a second look. A price cut of 12.5% means selling 25% more candles just to stand still. Discounts feel like a way to grow sales, but they work against you unless they bring in a lot of extra buyers. Our guide to markup vs margin shows the same effect from the pricing side.

Price is usually the strongest lever, because a price rise goes straight into contribution without costing anything extra per unit. The catch is that customers may buy fewer at the higher price, which the formula can't tell you. That's a judgement you have to make about your own market.

How safe is your current level of sales?

Suppose the candle maker currently sells 150 candles a month. The gap between actual sales and break-even sales is the margin of safety:

• 150 − 120 = 30 candles above break-even.
• As a share of sales: 30 ÷ 150 = 20%. Sales could fall by a fifth before the business starts losing money.
• Monthly profit: 30 × $15 = $450. Checking it the long way: sales of $3,600, minus $1,350 of materials, minus $1,800 of fixed costs, leaves $450.

A small margin of safety tells you the business is fragile: one slow month could tip it into a loss.

The same answer from the cost side

Another way to see break-even is through the cost of each unit once fixed costs are shared out. At 120 candles, fixed costs are $1,800 ÷ 120 = $15 per candle. Add the $9 of materials and each candle costs $24 to make and sell, exactly the price. That's break-even seen from the other side.

At 200 candles, the fixed costs are spread more thinly: $9 per candle, for a total of $18. That's why volume helps: the fixed costs don't grow, so each extra sale lowers the average cost. The Cost per Unit Calculator shows this split for your own numbers.

Where the simple model stops being accurate

Break-even analysis is a model, and it rests on a few simplifications that real businesses break:

• Fixed costs aren't fixed forever. Sell enough and you'll need a bigger studio or help, and fixed costs jump to a new level.
• Variable costs can change with volume. Buying wax in bulk may lower the cost per candle, and rush orders may raise it.
• One price, one product. Most businesses sell several products at different margins. You can still use the method with an average contribution, but the answer then depends on your sales mix.
• Demand isn't in the formula. It tells you how many you need to sell, not how many people will buy.
• Tax isn't included. Profit here is before income tax. If you charge sales tax, VAT or GST, use prices without it; see our guide on removing VAT or GST from a price.

None of this makes the number useless. It gives you a baseline, and every what-if starts from it.

Your own break-even in four inputs

1. Add up your monthly fixed costs.
2. Work out the variable cost of one unit.
3. Enter your selling price, before any sales tax.
4. Optionally, add the monthly profit you're aiming for.

The Break-Even Calculator returns the units and sales you need. If you're not sure your price is right, the Profit Margin Calculator shows how much of each sale you keep.

Last reviewed: 11 October 2026. The candle business is invented to show the method, and this guide uses no tax rates or official figures. It's general information, not financial or business advice.