Break Even Formula: The Complete
Break-Even Analysis Guide
Master the break even formula: calculate break-even point in units and revenue, use contribution margin, and apply it to e-commerce and campaigns.
The Break Even Formula
Break-Even (revenue) = Fixed Costs ÷ Contribution Margin Ratio
Costs that don't change with volume: rent, salaries, software, etc. Use same period as units (e.g. monthly).
Contribution margin per unit. Variable cost = COGS + shipping + fees per unit/order.
Units (or revenue) needed so total revenue = total costs. Above that = profit.
Quick Example
Fixed costs $12,000/month. Price $60, variable cost $25.
Break-even = $12,000 ÷ ($60 − $25) = $12,000 ÷ $35 = 343 units
Break-even revenue = 343 × $60 = $20,580 per month.
See Revenue and Margins by Segment
StoreRadar shows revenue, orders, and margins by product and channel so you can plug into break-even and contribution analysis.
Break Even Formula Variations
Units, revenue, target profit, and margin of safety
Denominator is contribution margin per unit. Use consistent period (e.g. monthly fixed costs → monthly units).
Contribution margin ratio = (Price − Variable Cost) ÷ Price. Result is in revenue dollars.
Add desired profit to fixed costs; same formula, different 'hurdle.'
Percentage drop in sales you can absorb before losing money.
Weight contribution margin by expected sales mix.
Worked Examples
Step-by-step break-even calculations
Break-Even in Units
Monthly fixed costs $15,000. Product sells for $80; variable cost (COGS + shipping + fees) is $35 per unit.
- 1 Fixed Costs = $15,000
- 2 Contribution margin per unit = $80 − $35 = $45
- 3 Break-even units = $15,000 ÷ $45 = 333.33
- 4 Round up: 334 units per month to break even
You need to sell 334 units per month to cover all costs.
Every unit beyond 334 contributes $45 to profit. Use this to set sales targets and evaluate promotions.
Break-Even Revenue
Same as above. What revenue do you need to break even?
- 1 Contribution margin ratio = ($80 − $35) ÷ $80 = 0.5625
- 2 Break-even revenue = $15,000 ÷ 0.5625 = $26,667
- 3 Check: 334 units × $80 ≈ $26,720 ✓
Break-even revenue is $26,667 per month.
Use revenue-based break even when you have a blend of products; ensure your mix matches the assumed contribution margin.
Break-Even for a Paid Campaign
You spend $2,000 on a Facebook campaign (fixed). AOV $65, variable cost $28 per order. How many orders to break even on the campaign?
- 1 Campaign fixed cost = $2,000
- 2 Contribution per order = $65 − $28 = $37
- 3 Break-even orders = $2,000 ÷ $37 = 54.05
- 4 Need 55 orders from the campaign to cover ad spend
55 orders from this campaign to break even. Any additional orders are profit (before other fixed costs).
If your cost per acquisition (CPA) is $2,000 ÷ 55 ≈ $36, you need CPA below contribution margin to profit on the campaign.
Common Break-Even Mistakes
Errors that distort your break-even point
Mixing Time Periods
Using annual fixed costs with a monthly price or variable cost, or vice versa.
Use one period throughout: e.g. monthly fixed costs, monthly units, and price per unit. Or annualize everything.
Ignoring Variable Costs
Treating COGS, shipping, or payment fees as zero or folding them into fixed costs.
Variable cost per unit must reflect all costs that scale with each sale. Otherwise break-even is overstated.
Using Average Price with Multiple Products
Using store-wide AOV when contribution margin varies a lot by product.
Use weighted average contribution margin by sales mix, or calculate break even per product line.
Forgetting One-Time or Semi-Fixed Costs
Omitting setup costs, launch campaigns, or step-costs (e.g. new hire at 500 orders).
Include all costs that must be covered in the period. For step-costs, recalc when you cross the threshold.
How to Track Costs and Revenue for Break-Even
Ways to get the numbers you need for break-even analysis
Option 1: Spreadsheets
Export fixed and variable costs from your books and orders. Calculate contribution margin and break-even manually. Update when costs or mix change.
- Full control
- No extra cost
- Manual
- Static
- Hard to segment
Option 2: Accounting or ERP
Use P&L and cost allocation from your accounting system. Good for fixed vs variable split; often lacks per-order variable cost by channel or product.
- Accurate P&L
- Audit trail
- Not always order-level
- Delayed data
Option 3: StoreRadar
StoreRadar gives you revenue, orders, and margins by segment. Combine with your fixed costs to see break-even by product, channel, or campaign in real time.
- Real-time revenue and margins
- Segment-level view
- Orders and AOV
- Monthly subscription
Related Formulas
Break-even builds on margin and cost metrics
| Formula | Calculation | Relationship |
|---|---|---|
| Contribution Margin | Price − Variable Cost per Unit | Building block of break-even; profit per unit |
| Gross Margin | (Revenue − COGS) ÷ Revenue × 100 | Margin view; COGS is main variable cost for many stores |
| Profit Margin | Net Profit ÷ Revenue × 100 | Beyond break even; profit as % of revenue |
| COGS | Cost of Goods Sold | Key variable cost in break-even |
| AOV | Revenue ÷ Orders | Price per 'unit' when unit = order |
Frequently Asked Questions
Common questions about break even
Break-even (units) = Fixed Costs ÷ (Price per Unit − Variable Cost per Unit). Break-even (revenue) = Fixed Costs ÷ Contribution Margin Ratio, where Contribution Margin Ratio = (Price − Variable Cost) ÷ Price. You break even when total revenue equals total costs (fixed + variable).
Fixed costs don't change with volume: rent, salaries, software subscriptions, insurance. Variable costs change with each unit sold: COGS, shipping per order, payment processing. Semi-variable (e.g. labor that scales) can be split or allocated for the formula.
Use store-level fixed costs (rent, salaries, marketing fixed, software) and average variable cost per order (COGS + shipping + payment fees). Price = average order value or average revenue per order. Break-even units = number of orders needed; multiply by AOV for break-even revenue.
Contribution margin = Price − Variable Cost per unit. It's the amount each unit contributes toward covering fixed costs. Contribution margin ratio = (Price − Variable Cost) ÷ Price, expressed as a decimal or percentage. Higher margin means fewer units needed to break even.
Given fixed and variable costs, you can solve for the price (or volume) needed to break even. Minimum price = Variable Cost + (Fixed Costs ÷ Expected Units). Use it to test whether a price point or promotion can cover costs at expected volume.
Treat the campaign or product launch as its own 'mini business': fixed cost = campaign spend + fixed allocation; variable = cost per sale. Break-even units = campaign fixed cost ÷ (price − variable cost). Compare to expected conversion volume to see if the campaign pays for itself.
See Revenue and Margins in Real Time
StoreRadar gives you revenue, orders, and margins by product and channel—so you can run break-even and contribution analysis on live data.
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