What is the break-even point?
The break-even point is the number of units (or the revenue) at which total revenue equals total cost. Below it you lose money; above it every extra unit adds its contribution margin to profit.
With $20,000 of fixed costs a month, a $60 price and $25 variable cost, the textbook break-even is 572 units. After payment fees and disputes it is 616.
Why the textbook number is too low
Most break-even calculators stop at price minus variable cost. For a business that takes card payments, three more costs scale with every unit:
Processing fee
$2.04
2.9% + $0.30 on $60
Refund leakage
$0.06
3% refunds × fee kept
Chargeback leakage
$0.39
0.5% × ($60 + $2.04 + $15 fee)
Extra units to break even
+44
616 instead of 572
The chargeback line looks small per unit. It is 0.5% of all orders paying for 100% of the loss on the disputed ones. Raise the dispute rate to 2% and break-even moves to 638 units. At 5% it is 689 units, 12% above the real target and 20% above the textbook one.
Fixed vs variable costs
| Fixed (per month, regardless of sales) |
Variable (per unit sold) |
| Rent, salaries, insurance |
Cost of goods |
| Software subscriptions |
Packaging and outbound shipping you absorb |
| Loan payments |
Payment processing fee |
| Minimum ad retainers |
Referral or marketplace fees |
| Warehouse lease |
Refund and chargeback expected loss |
Marketing is the awkward one. A fixed monthly budget is a fixed cost; cost-per-acquisition spend is variable. Put it where it behaves.
Sensitivity: price and dispute rate
The table under the calculator shows break-even units at −10%, current and +10% price. It crosses those with 0%, 0.5%, 1% and 2% dispute rates.
Two things stand out on most inputs. A 10% price rise cuts the break-even target by 15% to 25%, because almost the whole increase flows to contribution margin.
A 10% price cut does the opposite and costs more: on the example it adds 133 units. Cutting the dispute rate from 2% to 0.5% is worth 22 units with no change to price.
−15%
Fewer units needed after a 10% price rise
On the example inputs, $66 instead of $60 cuts break-even from 616 to 523 units. Price is the strongest lever; dispute rate is the cheapest one.
Break-even ROAS: the ad spend ceiling
Paid traffic is the variable cost most break-even tools ignore. Break-even ROAS is the return on ad spend at which an ad-driven order makes zero profit. It equals price divided by contribution margin, so the leakage lines raise it.
Use the real contribution margin as the ad spend ceiling per order. Fixed costs still need covering, so the target ROAS for growth sits above break-even. The ROAS calculator covers that target.
Break-even with more than one product
A store with several SKUs breaks even on a blended contribution margin, weighted by sales mix. Take two products: A sells at $60 with a $32.51 real contribution margin and makes up 70% of units. B sells at $30 with a $12 margin and makes up 30%.
Weighted margin = 0.7 × $32.51 + 0.3 × $12 = $26.36. Break-even = $20,000 ÷ $26.36 = 759 units, about 531 of A and 228 of B. If the mix shifts toward B, the target rises. Run the calculator once per product line, or once on the weighted figures, and recheck when the mix moves.
How to lower your break-even point
Raise contribution margin before cutting fixed costsA $3 saving per unit on a $32 margin cuts break-even by 9%; cutting $3,000 of fixed costs cuts it by 15%, but costs more to achieve.
Cut dispute and refund ratesBoth move contribution margin with no change to product or price.
Convert fixed to variable where possibleFulfillment by a 3PL turns warehouse lease into a per-order fee that only hits when you sell.
Test price in the sensitivity tableMost products can absorb 5% to 10% without a volume drop that offsets it.
Recheck monthlyInterchange, shipping rates and dispute rates all drift; a break-even set in January is wrong by June.
Frequently asked questions
How do I calculate the break-even point?
Divide fixed costs by the contribution margin per unit (price minus variable cost per unit). $20,000 ÷ ($60 − $25) = 572 units. Add payment fees and expected refund and chargeback losses to variable cost for a realistic figure.
What is contribution margin?
Price minus all variable costs per unit. It is the amount each sale contributes toward fixed costs and, once those are covered, profit.
What is break-even revenue?
Break-even units multiplied by price. On the example, 616 × $60 = $36,960 a month.
Should payment processing fees count as variable costs?
Yes. They are charged on every sale, so they reduce contribution margin exactly like cost of goods. A 2.9% + $0.30 fee on a $60 sale is $2.04 per unit.
How do chargebacks change the break-even point?
Each lost dispute costs the sale, the processing fee and a dispute fee. Spread across all orders at a 0.5% rate, that is about $0.39 per unit on a $60 product, or 8 extra units on the example. Fees, refunds and disputes together add 44 units, close to 8%.
What is a break-even analysis used for?
Pricing decisions, go/no-go on new products, setting sales targets, and judging whether a fixed-cost increase (a hire, a lease) is covered by expected volume.
How many units do I need to sell to make a target profit?
Add the profit target to fixed costs and divide by the contribution margin. For $10,000 of monthly profit on the example: ($20,000 + $10,000) ÷ $32.51 = 923 units. The calculator's break-even figure is the same formula with the target set to zero.
How do I do a break-even analysis in Excel?
Put fixed costs, price and variable cost in three cells, then use =fixed/(price-variable cost). To match this calculator, subtract the processing fee and the expected refund and dispute loss per unit from the price first. The sensitivity table is a two-variable data table.
What is break-even ROAS?
The return on ad spend at which a paid order makes no profit: price divided by contribution margin. On a $60 product with a $32.51 real margin that is 1.85x. Below it, every ad-driven sale loses money even before fixed costs.
Sources
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