Break Even Point Naira Example: How to Calculate Yours
🧰 Tools & Templates · By Fincaly Team · · 8 min read
This break even point naira example shows how to find the sales you need each month to cover all your costs. Divide your fixed costs by the profit you make on each unit sold. Everything you sell above that point is profit, and everything below it is a loss.
If you are new to the idea, read what a break-even point is first. This guide focuses on the numbers: the formula, two worked examples in Naira and how to use the result to set targets and test decisions.
The break-even formula
Break-even units = fixed costs ÷ (selling price - variable cost per unit)
- Fixed costs stay about the same whatever you sell: rent, salaries, subscriptions, loan repayments and similar.
- Variable costs change with each sale: stock, packaging, delivery per order, card or POS fees.
- Contribution per unit is the selling price minus the variable cost. It is what each sale adds toward covering your fixed costs.
To get break-even in naira, multiply break-even units by the selling price.
Break even point naira example: a shop
A small shop sells an item for ₦6,000. Each costs ₦3,500 in stock and packaging.
- Contribution per unit: 6,000 - 3,500 = ₦2,500
- Monthly fixed costs: rent ₦120,000 + salary ₦150,000 + data and power ₦30,000 = ₦300,000
- Break-even units: 300,000 ÷ 2,500 = 120 units a month
- Break-even sales: 120 × 6,000 = ₦720,000
If the shop sells 150 units, it is 30 units above break-even and makes 30 × 2,500 = ₦75,000 profit. If it sells 100 units, it is 20 units short and loses ₦50,000. The figures are illustrative; use your own.
A second example: a service business
A freelance designer charges ₦80,000 per project. Direct costs per project, such as stock images, software time and a subcontractor, average ₦20,000. Fixed costs are ₦240,000 a month, including rent for a workspace, data, software and a salary for the designer.
- Contribution per project: 80,000 - 20,000 = ₦60,000
- Break-even projects: 240,000 ÷ 60,000 = 4 projects a month
- Break-even revenue: 4 × 80,000 = ₦320,000
If the designer lands 6 projects, the 2 above break-even contribute ₦120,000 profit. This shows that for service businesses, even a small number of extra jobs makes a large difference. See how service businesses track profit.
Turn your break-even into a daily target
A monthly figure can feel far away. Break it into daily and weekly goals:
- ₦720,000 a month over 26 trading days is about ₦27,700 a day
- Over four weeks it is ₦180,000 a week
Write the daily target where you can see it. On days you miss it, note why. On days you beat it, note what worked.
Test a price change
What if the shop raises the price from ₦6,000 to ₦6,500?
- New contribution: 6,500 - 3,500 = ₦3,000
- New break-even units: 300,000 ÷ 3,000 = 100 units
- New break-even sales: 100 × 6,500 = ₦650,000
A ₦500 increase reduced break-even from 120 to 100 units, as long as customers keep buying. See how to price products for profit and raising prices without losing customers.
Test a cost change
What if rent rises by ₦30,000 a month?
- New fixed costs: ₦330,000
- New break-even units: 330,000 ÷ 2,500 = 132 units
A ₦30,000 monthly increase means 12 more sales are needed just to stay level. Check break-even every time a major cost changes.
A third example: a food seller
A food seller prepares meal packs and sells each at ₦3,500. Ingredients, packaging and gas cost ₦1,700 per pack. Fixed costs are ₦210,000 a month: kitchen rent, a helper's pay, data and a delivery rider retainer.
- Contribution per pack: 3,500 - 1,700 = ₦1,800
- Break-even packs: 210,000 ÷ 1,800 = about 117 packs a month
- That is roughly 4 packs a day over 30 days
At 5 packs a day, or 150 a month, the seller makes 33 × 1,800 = about ₦59,400 profit. At 3 packs a day, the seller loses money. This kind of arithmetic helps decide how much to cook, how many orders to chase and whether a promotion is worth it.
Setting a profit target
Break-even is where profit is zero. To aim for a profit, add your target to fixed costs:
Units for target profit = (fixed costs + target profit) ÷ contribution per unit
If the shop above wants ₦100,000 profit a month, it needs (300,000 + 100,000) ÷ 2,500 = 160 units. Once you know that, you can plan marketing, staffing and stock around a real number. See how to set business financial goals.
Margin of safety
The margin of safety is how far your actual sales are above break-even. If you sell ₦900,000 and break-even is ₦720,000, your margin of safety is ₦180,000, or 20% of sales. A bigger cushion means you can survive a bad month. A small cushion means you are exposed. Track it alongside your financial health numbers.
Common mistakes
- Leaving out your own salary. Include a fair wage if you work in the business.
- Mixing fixed and variable costs. The result will be wrong.
- Using one price for products with different margins. Calculate by product group, or use an average margin.
- Using last year's costs. Update the figures.
- Calculating once. Recalculate monthly.
Next steps
Take your last month's costs, split them into fixed and variable, and work out your own break-even in units and in Naira. Then set a daily target and track it for two weeks.
Cover photo by FIN on Unsplash.
Frequently asked questions
What is the break-even point formula?
Divide fixed costs by the contribution per unit, which is selling price minus variable cost per unit. The answer is the number of units you must sell to cover all costs.
How can I lower my break-even point?
Reduce fixed costs, reduce the variable cost per unit, or raise your selling price if customers will accept it.
Should I calculate break-even in units or in naira?
Both are useful. Units help with production and stock planning, while naira sales help with monthly targets.