How do you calculate the break-even point?

The break-even point is the sales volume at which a business covers its costs for a period: fixed costs ÷ the contribution each unit leaves after variable costs.

A shop with €40,000 of monthly fixed costs and €20.00 left per unit needs 2,000 units.

For ecommerce the hard part is where advertising, fulfilment and returns belong, and keeping business break-even apart from break-even ROAS. All amounts exclude VAT and cover one month.

Which costs are fixed and which are variable?

Fixed costs stay unchanged within the sales range you are planning for; variable costs move with orders. Use the same period and scope for both. A shop’s monthly overhead cannot be compared with one product’s annual contribution.

Net revenue should already reflect discounts and refunds. Include the remaining expected costs of returns, such as return shipping, without deducting refunded revenue again. For acquisition-specific analysis, distinguish cost per order from the cost of acquiring a new customer.

Keep the distinction between a product and the whole business explicit. Product contribution helps cover shared overhead. Allocating all shop overhead to every product separately would count those costs repeatedly.

What is the break-even point formula?

Step 1. Calculate break-even units

Break-even units = fixed costs ÷ (selling price − variable cost per unit). Round up when the answer is a fraction of a unit. If contribution is zero or negative, selling more cannot cover positive fixed costs.

This is the standard unit break-even method explained by OpenStax. For example, assume one product sells for €50.00, all variable costs including advertising total €30.00 per unit, and monthly fixed costs are €40,000.

Contribution after variable costs is €50.00 − €30.00 = €20.00. The shop needs €40,000 ÷ €20.00 = 2,000 units to break even.

Show the dataHide the data

Revenue meets total costs at 2,000 units

Units sold in one month	Revenue	Total costs
0	€0	€40,000
1,000	€50,000	€70,000
2,000	€100,000	€100,000
3,000	€150,000	€130,000

The next unit contributes €20.00 of operating profit only while price, unit costs and fixed costs remain unchanged.

Extra warehouse space, a higher acquisition cost or a discount changes the answer. This is a planning scenario, rather than a forecast that those sales will happen.

Step 2. Convert the answer into revenue

Break-even revenue = fixed costs ÷ contribution-margin ratio, where the ratio is contribution per unit divided by selling price. In our example, €20.00 ÷ €50.00 = 40%, so required revenue is €40,000 ÷ 0.40 = €100,000.

Illustrative data: the unit and revenue methods use the same price and cost assumptions.

For a shop selling several products, use a revenue-weighted contribution-margin ratio for the expected sales mix. A shift towards lower-margin products raises the revenue needed to cover overhead.

Do not treat an arbitrary allocation of shared rent as an incremental cost when deciding whether one more order is worthwhile.

How does break-even ROAS differ from the break-even point?

Break-even ROAS = 1 ÷ contribution margin before advertising. Here, subtract product, fulfilment, payment and expected return costs from net revenue, but exclude advertising. ROAS already divides revenue by ad spend; subtracting ads inside the margin would count their effect twice.

For a separate advertising example, take a €50.00 product with €30.00 of non-ad variable costs. It leaves €20.00 before ads: a 40% margin and a break-even ROAS of 2.5. Use the calculator to check your own margin and target.

Illustrative data. The first row has a ROAS of 2.5 and covers advertising, but contributes nothing towards rent or salaries. Unlike the earlier business example, the €30.00 here excludes ads.

POAS = ROAS × contribution margin before ads, so break-even POAS is 1.0. A ROAS of 4 at a 40% margin gives POAS 1.6 and leaves €7.50 per €50.00 order after €12.50 of ads, before fixed costs.

This is why one ROAS target can hide product-level losses. Covering ads is a lower threshold than covering the business’s overhead and desired profit. When setting target ROAS from margin, start with the break-even floor and allow room above it for both.

What does a discount do to the break-even point?

A discount reduces contribution unless costs fall too. Return to the business example: at a €45.00 price and unchanged €30.00 variable costs, contribution falls to €15.00. Required volume becomes €40,000 ÷ €15.00 = 2,666.67, rounded up to 2,667 units.

Show the dataHide the data

A €5.00 discount increases required volume by one third

Selling price excl. VAT	Units needed to cover fixed costs
€50.00	2,000
€45.00	2,667

Illustrative data, €40,000 of monthly fixed costs.

That is roughly one third more units than before. It does not establish that customers will buy the extra volume, or that advertising cost per order will stay unchanged. Check those assumptions before treating a discount as a route to more profit.

Product Segmentation segments products by ad clicks and return and writes the result to Merchant Center labels, so campaigns can give each product higher or lower priority. Keep the economic question clear: will the additional sales leave enough contribution after ads to help cover overhead?

Final thoughts

Break-even is two numbers, not one: the ROAS that covers a product’s ads, and the volume that covers the business. A product can clear the first and still leave nothing for the second.

Start with one product’s net price, non-ad variable costs and advertising cost.

Calculate what each sale leaves, then compare the combined contribution from your expected product mix with the fixed costs for the same period. Repeat when prices, returns, acquisition costs or the sales mix change.

If you are planning a new shop rather than running one, the SBA’s break-even planning reference puts the same calculation in the context of start-up costs.