Break-Even Point Formula
Break-even gets talked about loosely as 'the point where you're not losing money,' but the actual formula requires separating fixed costs from per-unit variable costs — a distinction that matters a lot once you're trying to answer 'how many do I need to sell.'
By Marginory team · Online sellers with hands-on experience across Etsy, Shopify & PODUpdated Fee data verified against official platform documentation
The formula (units)
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit)
The denominator — price minus variable cost per unit — is called the contribution margin. It's how much each unit sold contributes toward covering your fixed costs before any of it becomes profit.
Fixed vs. variable costs — get this split right first
| Fixed costs (don't scale with sales) | Variable costs (scale per unit) |
|---|---|
| Monthly platform subscription, one-time design cost, equipment purchase, fixed monthly ad retainer | Product/material cost, per-order platform fee, shipping cost per order, per-unit affiliate commission |
Getting an item into the wrong column throws off the whole calculation — a common mistake is treating a monthly subscription fee (fixed) as if it scales per unit, which understates how many units you actually need to sell to cover it.
Worked example
Fixed costs $150/month (subscription + fixed ad retainer), price per unit $25, variable cost per unit $16:
Break-even in revenue, not just units
For sellers with multiple products at different prices, calculating break-even in units for a single SKU doesn't capture the whole picture. Break-even revenue (using the blended contribution margin ratio across your product mix) is more useful in that case — it tells you the total monthly revenue needed to cover fixed costs, regardless of which specific products generate it.