What is Break-even Point?

The break-even point is where revenue exactly covers all costs — no profit, no loss. For online stores, it is typically the monthly order count at which profitability begins.

Formula

Break-even Point (units) = Fixed Costs / (Average Selling Price - Variable Cost per Unit)

Example

If monthly fixed costs are $5,000 (warehouse, software, salaries), average selling price is $80, and variable cost (COGS + shipping + payment fees) is $48 per unit, break-even = $5,000 / ($80 - $48) = 156 orders/month.

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Related Terms

Gross Margin

Gross margin is the difference between revenue and COGS, as a percentage. With the median e-commerce net profit at 3%, this number determines viability.

Net Margin

Net margin is the profit percentage remaining after all costs (COGS, ads, shipping, operations). The e-commerce median is just 3% — every percentage point matters.

Contribution Margin

Contribution margin shows how much a product "contributes" toward covering fixed costs after all variable costs are deducted. The evolved version of margin.

Cash Flow

Cash flow is the difference between money flowing in and out of your business over a given period. Your business can be profitable and still run out of cash.

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What is Break-even Point? | Margyn Glossary