You calculate it by dividing fixed costs by the contribution margin per unit: the price of one sale minus the variable cost of delivering it. Fixed costs are what you pay regardless of volume — rent, software, salaries. Variable costs move with each sale — materials, payment fees, per-unit fulfilment. The result tells you how many units, clients or subscriptions you must sell in a period before anything you earn is genuinely yours.
Its value to a founder is that it converts a vague ambition into a countable target. "Make the business work" is not actionable; "sell 47 subscriptions a month" is. It also exposes pricing problems that revenue growth hides. If your contribution margin is thin, break-even sits at a volume you may never reach, and no amount of marketing spend fixes that — only a price rise or a cost cut moves the line. Recalculate whenever fixed costs change, because adding a single ongoing expense moves the target immediately.
A concrete example: your software has $6,000 a month in fixed costs — hosting, tools, a part-time developer. You charge $49 a month and each customer costs about $6 in support and infrastructure, so contribution margin is $43. Break-even is $6,000 ÷ $43, or 140 customers. At 120 you are losing money every month while feeling busy. At 200 you are earning roughly $2,580 in profit. The whole business, in one number.