---
title: "How do you calculate the break-even point? | Product Metrics"
description: "How do you calculate the break-even point? Fixed costs ÷ contribution per unit: a break-even point calculation for ecommerce, in units, revenue and ROAS."
canonical: "https://www.productmetrics.io/blog/how-do-you-calculate-the-break-even-point"
pageType: article
language: en
publisher: "Product Metrics"
author: "Berend Vrakking"
datePublished: 2026-10-17
dateModified: 2026-10-23
image: "https://www.productmetrics.io/og/blog/how-do-you-calculate-the-break-even-point.png"
---

> Content index: https://www.productmetrics.io/llms.txt

# How do you calculate the break-even point?

## Key takeaways

- Break-even units = fixed costs ÷ contribution per unit after variable costs. With €40,000 of monthly fixed costs and €20.00 per unit, you need 2,000 units.
- Break-even revenue = fixed costs ÷ contribution-margin ratio. A 40% ratio and €40,000 of fixed costs require €100,000 of revenue.
- For break-even ROAS, use contribution margin before advertising: 1 ÷ margin. A 40% margin needs a ROAS of 2.5, which covers ads but leaves nothing for fixed costs.

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.

| Cost | Treatment in this example | What to check |
| --- | --- | --- |
| Warehouse rent and core salaries | Fixed monthly costs | Additional capacity can increase the fixed total |
| Product cost and packaging | [Variable cost](https://www.productmetrics.io/glossary/variable-cost "A variable cost is a cost that rises and falls with the number of orders you take, such as product cost, shipping and payment fees.") per unit | Use the cost of the units sold |
| Fulfilment and payment fees | Variable cost per order | Allocate shared order costs consistently |
| Refunds and returns | Expected net effect per order | Do not subtract refunds twice |
| Advertising | Variable per order or fixed period budget | Count the spend once, using an explicit assumption |

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](https://www.productmetrics.io/blog/customer-acquisition-cost-formula).

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](https://openstax.org/books/principles-managerial-accounting/pages/3-2-calculate-a-break-even-point-in-units-and-dollars). 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.

**Figure: Revenue meets total costs at 2,000 units.** At 2,000 units, €100,000 of revenue covers €60,000 of variable costs and €40,000 of fixed costs.

![Line chart of revenue and total costs by units sold, illustrative data: the lines meet at 2,000 units, where €100,000 of revenue covers €40,000 of fixed and €60,000 of variable costs.](https://www.productmetrics.io/images/blog/how-do-you-calculate-the-break-even-point/volume-and-cost.png)

| 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 |

_Source: Illustrative data. Revenue = units × €50.00; total costs = €40,000 + units × €30.00_

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**.

| Monthly result | Calculation | Amount |
| --- | --- | ---: |
| Revenue | 2,000 units × €50.00 | €100,000.00 |
| Variable costs, including ads | 2,000 units × €30.00 | €60,000.00 |
| Contribution towards fixed costs | Revenue − variable costs | €40,000.00 |
| Operating profit | Contribution − €40,000 fixed costs | €0.00 |

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](https://www.productmetrics.io/glossary/roas "Return on ad spend (ROAS) is the revenue your ads generate for every euro you spend on them.") 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](https://www.productmetrics.io/glossary/break-even-roas "Break-even ROAS is the revenue-to-ad-spend ratio at which contribution profit exactly covers advertising costs.") of 2.5. Use the [calculator to check your own margin and target](https://www.productmetrics.io/break-even-roas-calculator).

| Revenue per order | Non-ad variable costs | Ad spend per order | Left for fixed costs |
| ---: | ---: | ---: | ---: |
| €50.00 | €30.00 | €20.00 | €0.00 |
| €50.00 | €30.00 | €15.00 | €5.00 |
| €50.00 | €30.00 | €10.00 | €10.00 |

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](https://www.productmetrics.io/blog/poas-vs-roas), so break-even [POAS](https://www.productmetrics.io/glossary/poas "Profit on ad spend (POAS) is contribution profit before advertising divided by ad spend.") 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](https://www.productmetrics.io/blog/break-even-roas-per-product). Covering ads is a lower threshold than covering the business's overhead and desired profit. When [setting target ROAS from margin](https://www.productmetrics.io/blog/target-roas-from-margin), start with the [break-even floor](https://www.productmetrics.io/break-even-roas-calculator) and allow room above it for both.

> **Grow revenue with the products that perform best.** Every product segmented on profit, so you know which ones get more priority. [Analyse your products for free](https://app.productmetrics.io/) Log in with Google, no credit card.

## 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**.

**Figure: A €5.00 discount increases required volume by one third.** With costs unchanged, reducing the price from €50.00 to €45.00 cuts contribution from €20.00 to €15.00 and raises break-even volume from 2,000 to 2,667 units.

![Bar chart of units needed to cover fixed costs, illustrative data: 2,000 at a €50.00 price and 2,667 at €45.00, so a €5.00 discount needs a third more units.](https://www.productmetrics.io/images/blog/how-do-you-calculate-the-break-even-point/discount-volume.png)

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

_Source: Illustrative data. Whole units rounded up from €40,000 ÷ (price − €30.00 variable cost)_

| Price | Variable costs | Contribution per unit | Units to break even |
| ---: | ---: | ---: | ---: |
| €50.00 | €30.00 | €20.00 | 2,000 |
| €45.00 | €30.00 | €15.00 | 2,667 |
| €40.00 | €30.00 | €10.00 | 4,000 |

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](https://www.productmetrics.io/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.

| Threshold | Covers | Formula |
| --- | --- | --- |
| Break-even ROAS | A product's ads | 1 ÷ [contribution margin](https://www.productmetrics.io/glossary/contribution-margin "Contribution margin is the revenue from a sale minus its variable costs, such as product cost, shipping, payment fees and returns.") before ads |
| Break-even POAS | The same, on profit | 1.0 |
| Break-even point | The whole business's fixed costs | Fixed costs ÷ contribution per unit |

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](https://legacy.sba.gov/business-guide/plan-your-business/calculate-your-startup-costs/break-even-point) puts the same calculation in the context of start-up costs.

## Frequently asked questions

### What if contribution per unit is zero or negative?

There is no finite break-even volume for positive fixed costs. Each sale leaves nothing towards overhead or adds a loss. The price, variable costs or product mix must change.

### Should advertising be included in break-even calculations?

Count it once. For business break-even, include variable advertising cost per order or put a fixed advertising budget in the period's fixed-cost total. For break-even ROAS, use contribution margin before advertising because ROAS already compares revenue with ad spend.

### Can I calculate break-even for several products?

Yes. Divide shared fixed costs by the weighted contribution-margin ratio for the expected revenue mix. Recalculate when the mix changes; an unweighted average of product margins can give the wrong answer.

## Keep reading.

- [Dropshipping break-even ROAS: formula and when to stop](https://www.productmetrics.io/blog/dropshipping-break-even-roas)
- [Dropshipping for beginners: an honest guide](https://www.productmetrics.io/blog/dropshipping-for-beginners)
- [Break-even ROAS per product: why one target hides losses](https://www.productmetrics.io/blog/break-even-roas-per-product)

---

Written by Berend Vrakking, founder of Product Metrics. Last updated 2026-10-23.

HTML version: https://www.productmetrics.io/blog/how-do-you-calculate-the-break-even-point