Break-even price is the lowest price that covers the costs of selling a product. It should include product cost, fees, shipping, packaging, ad cost, refunds allowance, and overhead allocation where relevant. A healthy selling price should sit above break-even.
Break-even price components
Cost component
Why it matters
Product cost
Base cost of goods
Platform fees
Marketplace or store fees
Payment fees
Card/payment processor costs
Shipping and packaging
Fulfilment cost
Advertising
Cost to acquire the sale
Refund allowance
Expected returns or replacements
Overhead
Apps, software, labour, fixed costs
Worked example
If a product costs £8, fees are £3, shipping and packaging are £4, advertising is £5, and overhead allocation is £2, the break-even price is £22. Selling at £22 means no real profit. Selling at £30 creates £8 before any other adjustments.
Why break-even price is not enough
Break-even only avoids loss. It does not fund growth, mistakes, stock risk, tax, owner pay, or future investment. A business that prices at break-even may stay busy but weak.
Using break-even before discounts
Discounting without knowing break-even is dangerous. A 20% discount can remove all profit if margin is already thin. Always calculate the discounted price after fees and ad costs before running promotions.
Common mistakes
Forgetting ad cost.
Ignoring shipping subsidies.
Using average fees when category fees differ.
Not including refunds.
Assuming overhead is zero.
Treating break-even as target price.
Practical pricing check
Set three prices: break-even, minimum acceptable profit, and ideal selling price. If customers will not pay above break-even, the product may need better positioning, lower costs, or a bundle strategy.
FAQ
What is break-even price?
It is the minimum price needed to cover costs before profit.
Should break-even include ads?
If ads are needed to make the sale, yes.
Is break-even price the same as selling price?
No. Selling price should normally be above break-even so the business makes profit.
What if market price is below break-even?
The product may need lower costs, a higher-value offer, bundling, or a different channel.
Should fixed costs be included?
For full business planning, include an overhead allocation.
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.
