Chartered Financial Analyst and tech industry M&A specialist with 12+ years in software valuation.
Determine how many software licenses you need to sell to cover your development costs. Enter any three variables—Total Fixed Costs, License Price, Variable Cost per License, or Licenses Sold—to solve for the fourth.
Software Breakeven Calculator
Software Breakeven Formula
The breakeven formula for a software product finds the number of licenses (Q) you must sell for your total revenue to equal all your fixed (development) and variable (per-customer) costs.
Q = F / (P – V)
Solve for Total Fixed Costs (F):
F = Q * (P – V)
Solve for License Price (P):
P = (F / Q) + V
Solve for Variable Cost per License (V):
V = P – (F / Q)
Variables Explained
- Total Fixed Costs (F): Your total upfront cost to build and launch the software (e.g., developer salaries, R&D, marketing launch).
- License Price (P): The one-time price the customer pays for one copy/license of the software.
- Variable Cost per License (V): ALL costs per-sale: (e.g., payment processing, transaction fees, incremental support, and server costs per-user).
- Breakeven Licenses Sold (Q): The number of licenses you must sell to reach $0 in profit.
Related Calculators
- SaaS (Subscription) Breakeven Calculator
- Startup Breakeven Calculator
- Product ROI Calculator
- Project Breakeven Calculator
What is a Software Breakeven Point?
A **Software Breakeven Point** is the number of licenses a company must sell to cover the entire cost of development. This model is common for one-time-purchase software (unlike SaaS, which is subscription-based).
**Fixed Costs (F)** are the most significant factor. This is your total “burn” to get the product to version 1.0. It includes all R&D, developer salaries, designer costs, legal fees, and the cost of your initial marketing launch. It’s a large, one-time, sunk cost.
**Variable Costs (V)** are the costs associated with selling one more copy. In the age of digital downloads, this is often low, but it is *not* zero. It must include payment processing fees (e.g., 2.9%), the cost of running download servers, and any incremental customer support cost associated with a new user.
The **Contribution Margin** (P – V) is your net profit on one license sold. This calculator finds how many licenses you must sell, each contributing this margin, to pay back your entire fixed development cost. Every sale after this point is almost pure profit.
How to Calculate Software Breakeven (Example)
Let’s calculate the breakeven point for a new desktop software application.
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Identify Total Fixed Costs (F):
It costs $40,000 in developer time and $10,000 in marketing/launch costs to build the software. Your total (F) is $50,000.
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Identify License Price (P):
You are selling a lifetime license for $299.00.
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Identify Variable Cost (V):
Payment processing (Stripe) costs $9.00. Incremental server/support cost per user is $40.00.
Total (V) = $9.00 + $40.00 = $49.00 (Note: for simplicity, we use $50 in the placeholder) -
Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per license: $299.00 (P) – $49.00 (V) = $250.00.
Next, divide the fixed costs by this margin:
Q = $50,000 / $250.00 = 200 -
Conclusion:
You must sell 200 licenses just to cover your development and launch costs and start making a profit.
Frequently Asked Questions (FAQ)
A SaaS calculator looks at *monthly* fixed and variable costs to find the number of *monthly subscribers* needed to breakeven *each month*. This software calculator looks at a large *upfront* fixed cost (development) to find the *total* number of one-time sales needed to pay back that cost, *ever*.
If you have a fixed monthly server cost (e.g., $1,000/mo) regardless of users, you should use the SaaS Breakeven Calculator. This calculator is for the “one-time sale” model where the only per-user costs are variable (e.g., support, transaction fees).
It depends. If you have a large *launch budget*, put that in (F). If you plan to spend on ads *per sale* (e.g., Cost Per Acquisition), you should add that average CPA to your (V), just like in dropshipping.
This is the most powerful use. Estimate your (F) (e.g., $50,000) and (V) (e.g., $50). Then, set a realistic sales goal (Q) (e.g., 250 licenses in the first year). Solve for (P) to find your minimum price: `P = ($50,000 / 250) + $50 = $200 + $50 = $250`. This means you must charge at least $250 per license.