Price, costs and volume are one equation. Change any of them here and watch the other two move.
The number that matters is contribution, which is your price minus the cost of delivering one more unit. Contribution is what pays your fixed costs, and once they are covered, everything after it is profit. Break-even is fixed costs divided by contribution per unit.
The most useful thing this reveals is how violently break-even moves with small price changes. On a £100 product with £60 of variable cost, contribution is £40. Raise the price 10% to £110 and contribution becomes £50. That is a 25% increase in the money available to cover fixed costs, so you need a fifth fewer sales to break even. Discounting works the same way in reverse, which is why a 10% discount is far more expensive than it looks.
Per unit, job, or month. Keep it consistent.
Here is exactly what the tool does with your numbers.
| Metric | Formula |
|---|---|
| Contribution per unit | price − variable cost |
| Contribution margin | contribution ÷ price |
| Markup | contribution ÷ variable cost |
| Break-even units | fixed costs ÷ contribution |
| Units for target profit | (fixed costs + target) ÷ contribution |
Margin and markup are not the same thing and confusing them is a reliable way to underprice. A product costing £60 sold at £100 carries a 40% margin but a 67% markup. If you want a 40% margin, divide the cost by 0.6 rather than multiplying it by 1.4. Multiplying gives you £84 and a margin of only 29%.
Keep the time period consistent. If fixed costs are monthly, expected units must be monthly too.
Divide your fixed costs by the contribution per unit, where contribution is the selling price minus the variable cost of delivering one more unit. If fixed costs are £4,000 a month and each sale contributes £40, you break even at 100 sales a month.
Only genuinely variable costs belong in contribution. Costs you pay regardless of volume, such as rent and salaries, are fixed and belong in the other half of the calculation.
Margin is profit as a percentage of the selling price. Markup is profit as a percentage of the cost. An item costing £60 and selling at £100 has a 40% margin and a 67% markup.
Mixing them up leads to systematic underpricing. To achieve a 40% margin, divide the cost by 0.6 to get £100. Adding 40% to the cost gives £84, which is only a 29% margin.
Far more than the discount percentage suggests, because it comes entirely out of contribution. On a £100 price with £60 of variable cost, contribution is £40. A 10% discount cuts the price by £10 but cuts contribution by a quarter.
To stand still on total contribution after that discount, you need to sell a third more units. Discounts are a volume bet, and worth making deliberately rather than casually.
Use cost to find your floor and value to find your ceiling. This calculator establishes the floor: the price below which volume actively harms you.
What customers will actually pay depends on the alternatives available to them and the size of the problem you solve, which is often well above cost-plus. Knowing the floor stops you accepting work that loses money, but it should not be the only input into the final price.
Built by Veris Labs
These calculators are a small, public version of what we do. The Veris Labs suite covers marketing and delivery, and where nothing off the shelf fits, we build it around your business instead.
