How to calculate the break-even point of your ecommerce: step-by-step guide
Calculating break-even correctly requires listing all costs, classifying them properly and applying the formula. In 5 concrete steps you can have the exact number of sales you need to not lose money each month.
The 5 steps to calculate break-even
List all your monthly fixed costs
Fixed costs are those you pay every month regardless of how much you sell. Whether you sell 0 units or 1,000, these costs are the same.
Typical fixed costs in ecommerce:
Calculate variable costs per order
Variable costs change with volume. For every order you process you incur these costs.
Example variable costs per order (selling price £55):
Calculate contribution margin
Contribution margin is how much each sale "contributes" to covering fixed costs. It is the difference between selling price (ex-VAT) and variable costs per order.
Contribution margin = Net price − Variable costs
Example: £45.45 (£55 ex-VAT 21%) − £31.50 = £13.95
Apply the formula
Now you just need to divide total fixed costs by the contribution margin.
With the example data:
Validate and set your safety margin
Break-even is the minimum. To run the business comfortably, set an objective 20–30% above break-even. In the example, if break-even is 59 sales, the minimum operating target would be 72–77 sales per month.
The safety margin is the percentage by which current sales exceed break-even. With 90 sales and 59 break-even: safety margin = (90 − 59) ÷ 90 = 34%. A healthy business has a safety margin of 20–40%.
Advanced version: break-even including advertising CPA
If all your customer acquisition comes from paid advertising with a known CPA, you can include it as an additional variable cost. This gives a more realistic break-even for your situation.
Same example + Meta Ads CPA of £12
With a £12 CPA and tight margins, break-even jumps from 59 to 421 sales. This reveals that the current business model does not scale well with paid advertising. You either need to raise the price, reduce CPA or improve product margin.
Quick reference: 3 formulas in one table
Three formulas to memorise for making bid and budget decisions without opening a spreadsheet:
Break-even sales
Budget ÷ (AOV × Margin %)
Minimum profitable ROAS
1 ÷ Margin %
Maximum profitable CPA
AOV × Margin %
Returns adjustment
If you have a 10% return rate, multiply your break-even sales figure by 1.1 for a realistic figure. This is equivalent to working with an effective margin ≈ gross margin × 0.9.
Remember these three formulas mark the floor (ROI = 0%). For real profit, set targets above: typically target CPA ≈ maximum × 0.8, tROAS ≈ minimum ROAS × 1.4.
Calculate your break-even in seconds
Enter your fixed costs, variable costs and selling price to get your exact break-even point.
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