The break-even point is the amount of sales or units that must be achieved for a business to not make a profit or a loss. To calculate a company’s break-even point, businesses need to know the total fixed costs, such as rent and wages, as well as their variable costs associated with the production of each unit of product. Once these costs are known, the formula can be applied: Break-Even Point = Fixed Costs ÷ (Price – Variable Cost). This simple equation can reveal the exact number of units a company needs to produce in order to cover its startup expenses and begin making a profit. Knowing your break-even point is an important component of formulating a successful business strategy.