ROI and Break-Even Calculator
Work out your return on investment, find how many units or how much in sales you need to break even, or see how long an investment takes to pay itself back. Each result comes with the working in plain numbers.
Your result
Enter your numbers above to see the result.
Results are simple estimates based on the numbers you enter. They do not predict the future and are not financial advice.
Three questions every investor and small business asks
Whether you bought shares, a rental flat, a coffee machine or a whole shop, the same three questions keep coming back. How much did I gain compared with what I put in? How much do I have to sell before I stop losing money? And how long until I get my money back?
Those are the questions of return on investment, break-even and payback. This page answers each of them with plain numbers, and shows the working so you can follow every step.
How to use this calculator
- Return (ROI): enter what you invested and what it is worth now. If you earned income along the way, or paid fees, add those too. Add the number of years to see the average return per year.
- Break-even: enter your fixed costs for the period, the price you sell each unit for, and the variable cost of each unit. You get the number of units and the sales value that cover all your costs, plus a chart. You can also add a profit target and the sales you expect.
- Payback period: enter the money you invested and the net cash it earns each month or year. You get the time until you have your money back, with a year-by-year table.
The formulas, in simple form
ROI = (final value + income − costs − amount invested) ÷ amount invested
Annualized ROI = (total returned ÷ amount invested)1 ÷ years − 1
Break-even units = fixed costs ÷ (price − variable cost)
Break-even sales = break-even units × price
Units for a profit target = (fixed costs + target profit) ÷ (price − variable cost)
Payback period = money invested ÷ net cash earned per period
Worked examples
Return on an investment
You buy shares for 5,000. After three years they are worth 6,200, you received 150 in dividends and paid 50 in fees. Your net gain is 6,200 + 150 − 50 − 5,000 = 1,300.00, so your ROI is 1,300 ÷ 5,000 = 26%. Over three years that works out to about 8.0% a year, not 8.7%, because gains compound.
Break-even for a café
Fixed costs are 6,000 a month. A coffee sells for 4.50 and costs 1.50 in ingredients and cups. Each coffee contributes 4.50 − 1.50 = 3.00 towards the fixed costs. To cover 6,000 you need 6,000 ÷ 3.00 = 2,000 coffees, which is 9,000 in sales. To earn a profit of 3,000 you need 9,000 ÷ 3.00 = 3,000 coffees. If you expect to sell 2,500, your profit is 2,500 × 3.00 − 6,000 = 1,500, and your margin of safety is 500 coffees, or 20%.
Payback on equipment
A machine costs 12,000 and adds 400 of net cash each month. The payback period is 12,000 ÷ 400 = 30 months, or two and a half years.
What ROI does not tell you
ROI is a handy single number, but it leaves things out. It ignores time, so 26% in one year and 26% in ten years look the same until you annualize. It ignores risk, so a safe 5% and a risky 5% are not equal. And it depends on what you count: if you forget fees, repairs or your own time, the ROI looks better than it really was. Use it to compare, and always ask how long and how risky.
Why recovering from a loss takes more than you lost
Losses and gains do not cancel out evenly. If an investment falls 50%, it must rise 100% to get back to where it started. The table shows the gain needed to recover from different losses.
| Loss | Gain needed |
|---|---|
| −10% | +11.1% |
| −20% | +25.0% |
| −30% | +42.9% |
| −40% | +66.7% |
| −50% | +100.0% |
| −60% | +150.0% |
| −75% | +300.0% |
Lowering your break-even point
If your break-even number looks too high, there are only a few levers. You can raise the price, lower the variable cost per unit, or cut fixed costs. Even a small rise in your contribution per unit has a big effect: raising the café price from 4.50 to 5.00 lifts the contribution from 3.00 to 3.50, and the break-even drops from 2,000 coffees to about 1,714.
The payback period, and its limits
Payback is easy to understand, and that is its strength. Its weakness is that it stops counting at the moment you get your money back. Two projects can both pay back in two years, yet one keeps earning for ten more years and the other stops. It also treats money earned later the same as money earned now. Use it as a quick screen, not the only test.
Common mistakes
- Leaving out costs and fees, which makes the ROI look better than it was.
- Comparing ROI figures over different time periods without annualizing them.
- Mixing fixed and variable costs in break-even. Put each cost in the right group.
- Using the wrong time period: fixed costs per month need monthly sales, not yearly.
- Assuming the break-even number is a target. It is the minimum, and you want to be above it.
This calculator is for general information and is not financial advice. A qualified adviser can help with your own situation.
Frequently asked questions
What is ROI?
ROI stands for return on investment. It tells you how much you gained or lost compared with what you put in, as a percentage. If you invest 5,000 and end up with a net gain of 1,300, your ROI is 1,300 ÷ 5,000 = 26%.
How do I calculate ROI?
Subtract what you invested from what you got back, including any income and minus any costs, then divide by what you invested. The ROI tab does this and also shows the money multiple and, if you enter a number of years, the average return per year.
What is the annualized ROI?
It is the steady yearly return that would give the same overall result. A 26% gain over 3 years is not 26% ÷ 3. It is about 8% a year, because gains compound. This is useful for comparing investments held for different lengths of time.
What is the break-even point?
It is the point where your total sales exactly cover your total costs, so you make neither a profit nor a loss. Sell fewer units and you lose money, sell more and you profit. The Break-even tab finds it in units and in sales value.
How do I calculate break-even units?
Divide your fixed costs by the contribution margin per unit, which is the selling price minus the variable cost. With 6,000 of fixed costs, a price of 4.50 and a variable cost of 1.50, each unit contributes 3.00, so you need 2,000 units.
What are fixed costs and variable costs?
Fixed costs stay the same however much you sell, such as rent, salaries and insurance. Variable costs change with each unit sold, such as ingredients, packaging or a sales commission. Splitting your costs this way is the key to a good break-even answer.
What is the margin of safety?
It is how far your expected sales are above the break-even point. If you expect to sell 2,500 units and break even at 2,000, the margin of safety is 500 units, or 20% of your sales. The bigger it is, the more your sales can fall before you start losing money.
What is the payback period?
It is how long it takes for an investment to earn back what it cost. Spend 12,000 on equipment that adds 400 a month, and the payback period is 30 months. It is simple and popular, but it ignores everything that happens after the payback point.
Is a high ROI always good?
Not on its own. ROI does not show how long it took or how risky the investment was. A 20% ROI over one year is very different from 20% over ten years, which is why the annualized figure matters. Higher return usually also comes with higher risk.
Is anything I enter saved or sent anywhere?
No. Everything is calculated in your browser, and nothing you type is uploaded or stored. This calculator is for general information and is not financial advice.
Related calculators
To work out margin and markup on a sale, use the profit margin and markup calculator. To see growth over time, try the compound interest calculator, and to see the effect of rising prices, the inflation calculator. The percentage calculator is handy for quick percentage changes.