Break Even Analysis is a powerful tool for any business. Put simply, it allows you to calculate how many units of your product or service need to be sold in order to cover all costs associated with the production and sale of that item. The break even equation states: Break Even Point (in sales) = Fixed Costs / (Sale Price – Variable Costs). In other words, divide your total fixed costs (such as rent, salaries, loan payments, and so on) by the difference between your sale price and variable costs (such as cost of materials, labor and so on). That will tell you exactly how many units of your product or service you must sell in order to break even – and start making money!