Free Break-Even Calculator

How to Use the Break-Even Calculator

This break even point calculator needs three numbers. Here is how to use it:

1. Enter your fixed costs: These are the costs that stay the same no matter how much you sell, like your Shopify plan, apps, rent, and salaries. A monthly figure works well.
2. Enter your variable cost per unit: This is what one extra sale costs you: product cost (COGS), shipping, payment and transaction fees, and pick and pack.
3. Enter your selling price per unit: This is what the customer pays for one unit.
4. Add a target profit (optional): If you have a profit goal on top of breaking even, enter it. The tool shows the extra units you need to hit it.
5. Read your results: The calculator instantly shows the units to break even, the revenue to break even, your contribution margin per unit, and your margin percent.

Break-even calculator showing 1,000 units and $25,000.00 revenue to break even from $10,000 fixed costs, $15 variable cost, and $25 selling price, with a $10.00 contribution margin per unit, 40% margin, and a break-even analysis chart where the revenue and total cost lines cross

How to Calculate Break-Even by Hand

You can run a break even analysis with a calculator and three numbers. Follow these steps:

1. Find the contribution margin per unit: Subtract the variable cost from the selling price. This is the money each sale leaves over to pay your fixed costs.
2. Divide fixed costs by the contribution margin: This gives the number of units you need to sell to break even. Round up, because you cannot break even on a fraction of a sale.
3. Multiply units by the selling price: This gives the revenue you need to break even. You can also divide fixed costs by the contribution margin ratio to get the same number.

That is the whole method. The calculator above does this for you and updates as you type.

The Break-Even Formula

The break even formula has two parts: one for units and one for revenue. First, the contribution margin:

$$\text{Contribution margin} = \text{Selling price} - \text{Variable cost}$$

Then the break-even point in units:

$$\text{Break-even units} = \frac{\text{Fixed costs}}{\text{Contribution margin}}$$

And the break-even point in revenue:

$$\text{Break-even revenue} = \frac{\text{Fixed costs}}{\text{Contribution margin} / \text{Selling price}}$$

The contribution margin ratio is just the contribution margin divided by the selling price. In a spreadsheet like Excel, the units formula is =FixedCosts/(Price-VariableCost), so you can build a quick break even calculator excel sheet from the same math.

Worked Example

Say you run a Shopify t-shirt store. Your fixed costs are $10,000 a month. Each shirt costs you $15 in product, shipping, and fees, and you sell it for $25.

First find the contribution margin:

$$\text{Contribution margin} = 25 - 15 = 10$$

Then divide fixed costs by that margin to get the units:

$$\text{Break-even units} = \frac{10{,}000}{10} = 1{,}000 \text{ units}$$

So you break even at 1,000 shirts, which is $25,000 in revenue, with a contribution margin of $10 per unit, or 40%.

A smaller store with $1,000 in fixed costs, a $10 variable cost, and a $25 price breaks even at just 67 units, because the contribution margin is higher at $15 (60%).

Fixed Costs vs Variable Costs for a Shopify Store

The split between fixed and variable costs is the heart of every break-even analysis. Here is what goes in each bucket for an ecommerce store:

Fixed costs stay the same whether you sell 10 orders or 10,000:

• Your Shopify plan and paid apps
• Rent, warehouse, or storage fees
• Salaries and contractor retainers
• Software subscriptions and accounting tools

Variable costs change with every unit you sell:

• Product cost, also called COGS
• Shipping and fulfilment
• Payment and transaction fees
• Pick, pack, and packaging materials

Break-Even vs Payback Time

Break-even and payback are not the same metric. The break-even point tells you the sales volume where revenue covers costs. The payback period tells you how long it takes to earn back a specific investment, like the cost of new equipment or a marketing push. Use break-even for pricing and feasibility, and use payback when you want to know how many months an investment takes to pay for itself.

Work Backwards: The Most You Can Pay for Inventory

You can rearrange the break even point calculator to solve for your costs instead of your volume. If you know how many units you can realistically sell, you can work out the most you can afford to pay per unit and still break even.

Rearrange the formula so the variable cost is the unknown:

$$\text{Max variable cost} = \text{Selling price} - \frac{\text{Fixed costs}}{\text{Target units}}$$

This is a useful sourcing check. If a supplier quote pushes your variable cost above this number at your expected volume, the deal will not break even.

Why Break-Even Matters for Ecommerce

Knowing your break-even point keeps your pricing honest. It tells you the minimum volume a product needs, whether a price is high enough to be feasible, and how much room you have for discounts. It also sets a ceiling on ad spend. Once you know the contribution margin on each order, you can work out your profit margin and your break even ROAS, which is the return on ad spend where ad revenue exactly covers product and ad cost. A store with a 40% margin breaks even on ads at a 2.5x ROAS, so any campaign below that loses money on a per-order basis.

Frequently Asked Questions

What is a break-even point?

The sales level where total revenue equals total costs, so you make zero profit. Below it you lose money; above it you profit.

How do I calculate the break-even point in units?

Divide fixed costs by the contribution margin per unit (selling price minus variable cost). Example: $10{,}000 \div (25 - 15) = 1{,}000$ units.

What is the break-even revenue formula?

Fixed costs divided by the contribution margin ratio (contribution margin / selling price). $10{,}000 \div 0.40 = 25{,}000$.

What is the difference between fixed and variable costs?

Fixed costs stay the same each month, like your Shopify plan, apps, and rent. Variable costs change per unit sold, like COGS, shipping, and fees.

Is this break-even calculator free?

Yes, it is 100% free, with no signup and unlimited calculations.

How do I find break-even for multiple products?

Estimate your sales mix, work out a blended average contribution margin across your products, then use that single number in the formula.

What is break-even ROAS?

The return on ad spend where ad-driven revenue exactly covers the product cost plus the ad cost. It uses the same contribution-margin idea applied to advertising.