Break Even Pricing is a business strategy that identifies the point of sale price at which total revenues and total costs are equal. This strategy helps businesses to determine an optimal pricing level so they can cover all of their costs, without making a loss or realizing a profit. The break-even formula takes into account variable costs such as materials, labor and shipping related to each unit sold. If the unit sales price is lower than the break-even price, the business will sustain losses. Therefore, setting prices too low can put a business in danger of not being able to turn a profit. By understanding your company’s break-even pricing point, you can determine what liquidity is needed to stay afloat and when it’s time to increase prices for maximum profitability.