Break-even point
The break-even point is the sales volume at which total contribution margin exactly covers fixed costs, so profit is zero. It is calculated as fixed costs divided by contribution margin per order, and tells an ecommerce operator how many orders a period must clear before anything is earned.
Break-even revenue = Fixed costs ÷ contribution margin %
| Variable | What it means |
|---|---|
| Fixed costs | Per-period costs that do not move with volume: rent, salaries, software, insurance. |
| Contribution margin per order | Average order value minus all variable costs on the order (the step-down to CM3). |
| Contribution margin % | Contribution per order ÷ average order value. |
Worked example
Example numbers. The A$27.60 contribution per order is the A$120 order stepped down on The Math.
What is a good break-even point?
A good break-even point is one that sits comfortably below your current volume - the gap between the two is your margin of safety, and that gap is the honest measure here, not any absolute number. Where the point sits depends entirely on your fixed cost base and your contribution margin per order: a lean 3PL operation on strong margin breaks even at a fraction of the volume a warehouse-heavy, thin-margin store needs. Compute your own floor with the free break-even units calculator.
Break-even point vs related metrics
| Metric | What it measures | How it differs from break-even point |
|---|---|---|
| Break-even ROAS | The return an ad dollar must clear: 1 ÷ contribution margin before marketing (CM2). | A per-ad-dollar hurdle for one campaign; break-even point is a whole-business volume against fixed costs. |
| Fixed costs | Per-period overheads. | The numerator - every dollar of overhead raises the orders needed to break even. |
| Contribution margin | Revenue minus variable costs. | The denominator - thinner contribution per order pushes the break-even point up. |
| Unit economics | The profit and loss of one order, customer or SKU. | Supplies the per-order contribution figure the break-even calculation depends on. |
Common mistakes
- Using gross margin as the denominator. Gross margin ignores fulfilment, fees and marketing, so it flatters contribution per order and understates the orders you need.
- Treating it as static. Discounting, AOV shifts, freight changes and new hires all move the point - it is a monthly number, not an annual one.
- Confusing it with break-even ROAS. One is order volume against fixed costs; the other is the hurdle a single ad dollar must clear. Different questions, different formulas.
- Assuming fixed costs hold at higher volume. The volume that clears today's break-even may demand a bigger warehouse or more headcount - which moves the point again.
- Computing on revenue without watching mix. Break-even revenue assumes contribution margin % holds; a shift in product mix quietly changes it.
Break-even point FAQ
Related
Blufire S2 Unit Economics computes the contribution per order this formula depends on - reconciled, per order, customer and SKU, in the Profitability Cube and the CM waterfall & bridge. The Math teaches the full step-down free.
Updated July 2026