Break-even point for online sellers: formula, example, and how to lower it
Your break-even point is the number of sales you need each month before the shop starts making money. Below it, every month costs you. Above it, each extra order adds real profit. Knowing the number turns a vague goal like "sell more" into a specific target.
Two kinds of costs
- Fixed costs stay the same no matter how much you sell: software subscriptions, a store plan, tools, storage, and any regular ad budget you commit to.
- Variable costs happen per order: product cost, packaging, shipping you pay, and marketplace or payment fees.
Step 1: Find your contribution margin per order
Contribution margin is what each order leaves over after its own variable costs. That is the amount available to pay down fixed costs.
Contribution margin = average order value − variable costs per order
Step 2: Divide fixed costs by contribution margin
Break-even orders per month = monthly fixed costs ÷ contribution margin per order
Round up, since you cannot sell part of an order.
Worked example
Illustrative figures only.
| Line | Amount |
|---|---|
| Average order value | $32.00 |
| Product cost (COGS) | −$9.50 |
| Packaging and shipping you pay | −$5.00 |
| Marketplace and payment fees | −$3.50 |
| Contribution margin per order | $14.00 |
| Monthly fixed costs (software, tools, ads) | $280.00 |
| Break-even orders | $280 ÷ $14 = 20 orders |
This shop needs 20 orders a month to cover its costs. Order 21 onward earns about $14 each, so 50 orders would mean roughly 30 × $14 = $420 of profit.
Break-even in revenue
If you think in sales dollars rather than orders, divide fixed costs by your contribution margin percentage.
Break-even revenue = fixed costs ÷ (contribution margin ÷ average order value)
In the example: $280 ÷ ($14 ÷ $32) = $280 ÷ 0.4375 = $640 in monthly sales.
How to lower your break-even point
- Raise average order value with bundles, multi-packs, or a free-shipping threshold just above your typical order. See our pricing guide.
- Cut variable costs by buying materials in bulk and right-sizing packaging. Our COGS guide helps you find where the money goes.
- Trim fixed costs: cancel subscriptions you do not use and pause ads that do not pay for themselves.
- Reduce returns and refunds, which add cost without adding sales. See tracking returns and refunds.
Check it every month
Costs and fees move, so recalculate break-even when you update your monthly P&L. If you sell on more than one channel, work out contribution margin per channel, since fees differ and one channel may be carrying the others. Educational content only, not financial or tax advice.
More seller guides
- Etsy fees explained: what Etsy actually takes from each sale
- How to calculate your Shopify profit margin (and what a good one looks like)
- Amazon FBA fees in 2026: what you pay and how to estimate it
- Quarterly estimated taxes for online sellers: a plain-English guide
- How to calculate COGS (cost of goods sold) for your online store
- Reorder point formula for small online shops (with safety stock examples)
- How to track returns and refunds as an online seller (and calculate refund rate)
- How to make a simple monthly profit and loss statement for your online shop
- What to include on an invoice: a checklist for small sellers and makers
- How to price handmade products: a simple formula that covers fees and pays you
- Inventory turnover ratio: how fast your stock actually sells
- Gross vs net profit margin: what each one tells an online seller
- Landed cost: the true cost of a product once it reaches your shelf
- Markup vs margin: why a 50% markup is not a 50% margin
SellerSheetKit is not affiliated with Etsy, Shopify, or Amazon. Fee figures are summarized from official sources on the date above and can change; verify against your seller account. Educational content only — not tax, legal, or accounting advice.