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Margin of Safety Calculator
The margin of safety tells you how far your actual (or expected) sales sit above the break-even point — the cushion you have before you start making a loss. It is (actual sales − break-even sales) / actual sales, and can be read in units, revenue or percentage terms. First find break-even: with $2,700 of fixed costs, a $45 price and a $30 variable cost, the contribution margin is $15 and break-even is 180 units. If you are selling 250 units, the margin of safety is (250 − 180) / 250 = 28% — sales could fall by 28% before you hit break-even. A thin margin of safety means the business is vulnerable to a small downturn; a fat one means comfortable headroom. Enter your fixed costs, price, variable cost and actual sales to see the cushion. Free, no login.
Margin of safety = (actual sales − break-even sales) / actual sales
- Can be expressed in units, revenue, or as a percentage — all give the same cushion
- Break-even first: CM = price − variable; break-even units = fixed / CM
- Worked example — fixed $2,700, price $45, variable $30: CM $15 → break-even 180 units
- Worked example — selling 250 units: margin of safety = (250 − 180)/250 = 28%
- A 28% margin of safety means sales can drop 28% before the business hits break-even
- A negative margin of safety means you are below break-even — currently running at a loss
Frequently asked questions
What is the margin of safety?
The margin of safety is the gap between your actual (or expected) sales and your break-even sales, expressed as a share of actual sales: (actual − break-even) / actual. It measures how much sales could fall before the business stops making a profit. If you break even at 180 units and are selling 250, the margin of safety is (250 − 180) / 250 = 28% — a 28% drop in sales would wipe out the profit and bring you back to break-even. It is a quick read on how exposed the business is to a downturn.
How do I calculate the margin of safety?
Work out the break-even point, then compare it to actual sales. With $2,700 of fixed costs, a $45 price and a $30 variable cost, the contribution margin is $15 and break-even is 2,700 / 15 = 180 units. If actual sales are 250 units, the margin of safety is (250 − 180) / 250 = 70 / 250 = 28%. You can compute it in units, in revenue (multiply both figures by the price), or as the percentage shown — all three describe the same cushion above break-even.
What is a good margin of safety?
There is no universal figure — it depends on how stable your sales are — but broadly, a higher margin of safety means more resilience. A margin of safety of 28% means sales could fall by more than a quarter before the business slips into a loss, which is comfortable for many small businesses. A very thin margin (say, under 10%) signals that a modest dip in demand would push you below break-even, so you might raise prices, cut variable costs, or reduce fixed costs to widen the cushion. A negative margin of safety means you are already below break-even and running at a loss.