How far sales can fall before losses. The Margin of Safety Calculator takes actual or budgeted sales, break-even sales and returns margin of safety plus sales cushion above break-even, reading. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Margins tell you where the money goes between revenue and profit. Track each margin over time and against similar businesses; a falling margin while revenue grows is the signal to investigate. Use the worked example below to check the maths against your own figures.
How the Margin of Safety Calculator works
How far sales can fall before the business starts losing money. Below 10–15% the business is one bad quarter from a loss; use the break-even calculator to get the break-even figure.
Worked example
With the example values (actual or budgeted sales of $800,000, break-even sales of $600,000), the margin of safety is 25%; sales cushion above break-even $200,000.00, reading Comfortable cushion. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is margin of safety calculated?
margin of safety = (sales − break-even sales) ÷ sales.
Which figures do I need?
Actual or budgeted sales, break-even sales. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
What is a good margin?
It depends on the industry: grocery and distribution run on low single-digit net margins, software and services on 20% or more. Compare with similar businesses and watch your own trend.
