Margin of Safety Calculator

About this calculator

Margin of safety measures how far a company's actual (or budgeted) sales can fall before it slips into a loss, expressed as a percentage: Margin of safety = (Actual sales − Breakeven sales) / Actual sales, where breakeven sales is the revenue level at which total contribution margin exactly covers fixed costs.

Management accountants and financial analysts use this figure in cost-volume-profit (CVP) analysis to gauge operating risk: a high margin of safety means a business has a large cushion against a sales downturn, while a low or negative one signals that even a modest drop in sales could push the business into losses, which is critical information when deciding whether to add fixed costs like new equipment or leases.

Small business owners setting sales targets, finance students studying CVP and breakeven analysis, and startup founders evaluating how much runway a dip in revenue would leave all use this calculation to translate breakeven analysis into a concrete risk cushion.