How to Work Out Margin of Safety?

Determine the expected sales volume or revenue

Determine the break-even sales volume or revenue

Subtract break-even sales from expected sales

Divide the result by expected sales

Multiply by 100 to get the margin of safety percentage

Margin of Safety = Expected Sales – Break-even Sales

Margin of Safety Percentage = (Margin of Safety / Expected Sales) × 100

For units:

Margin of Safety in units = Expected units sold – Break-even units sold

For sales value:

Margin of Safety in sales = Expected sales revenue – Break-even sales revenue

Use the result to see how much sales can fall before reaching break-even