Break-even is the point where sales cover costs. Below break-even, the business loses money. Above break-even, it begins to generate profit. For eCommerce, break-even depends heavily on product cost, platform fees, shipping, ads, and fixed overhead.
Break-even formula
Break-even units = fixed costs ÷ contribution margin per unit
Contribution margin is selling price minus variable cost per sale. If a product sells for £30 and variable costs are £18, contribution margin is £12. If monthly fixed costs are £600, break-even is 50 units.
Example calculation
Item
Amount
Selling price
£30
Variable cost per unit
£18
Contribution margin
£12
Monthly fixed costs
£600
Break-even units
50
Fixed vs variable costs
Fixed costs are costs that exist even if no sale happens, such as software, subscriptions, rent, and some staff costs. Variable costs happen with each sale, such as product cost, platform fees, payment fees, packaging, shipping, and ad cost per order.
Why break-even matters
Break-even reveals whether a product is structurally viable. A seller may think they need more sales, but the real issue may be low contribution margin. If every sale contributes only £2, the business needs a lot of volume before profit appears.
Common mistakes
Ignoring fixed costs.
Using revenue instead of contribution margin.
Forgetting payment and platform fees.
Not including ad cost per sale.
Treating break-even as success rather than survival.
Ignoring refunds and returns.
Practical use
Calculate break-even before launching, before discounting, and before scaling ads. A good product should have enough margin to cover mistakes, refunds, and normal business friction — not just a perfect-case spreadsheet.
FAQ
What does break-even mean?
Break-even is the point where revenue covers costs and profit is zero.
What costs are included?
Include fixed costs and variable costs relevant to the product or business model.
Is break-even the same as profit target?
No. Break-even means no loss, no profit. A business still needs profit above break-even.
Why is contribution margin important?
It shows how much each sale contributes toward fixed costs and profit.
Can break-even change?
Yes. Prices, costs, fees, ad spend, refunds, and volume can all change break-even.
Business note: CalcBeacon eCommerce guides are educational and designed to explain calculations, pricing logic, and profitability checks. They are not tax, legal, accounting, or financial advice. For important business, VAT, tax, or platform compliance decisions, check official guidance or speak with a qualified professional.
