What is the break-even point?
The break-even point is how much you need to sell to cover all your costs, so you neither make nor lose money. The break-even point formula is fixed costs ÷ (price minus variable cost per unit). A store that costs $3,600 a month, where each $64 order leaves $24 after its own costs, breaks even at 150 orders.
Break-even point formula in orders and in dollars
In orders, divide fixed costs by your contribution margin, what one order leaves after its own costs. In sales dollars, divide fixed costs by the contribution margin ratio, that margin as a share of the price. Fixed costs stay put whether you ship 20 orders or 400. Variable costs come with each order: the product, the label and box, the card fee.
How do you calculate the break-even point?
Say your month looks like this.
| Sum | Result |
|---|---|
| Fixed costs: Shopify plan, apps, ad budget, part-time help | $3,600 |
| $64 average order minus $27 product, $11 label and box, $2 card fee | $24 an order |
| $3,600 ÷ $24 | 150 orders |
| $3,600 ÷ 0.375, the $24 as a share of $64 | $9,600 in sales |
Each order past 150 adds $24 of profit, so 200 orders leave $1,200.
Are ads a fixed or variable cost?
Either, but never both. A set monthly ad budget does not change with orders, so the table counts it as fixed. Shopify's break-even guide lists ad spend as a variable cost instead. Whichever you pick, judge ads alone by your break-even ROAS.
Where are your fixed and variable costs in Shopify?
Your Shopify bills, under Settings then Billing, hold both kinds. Your plan's monthly fee and recurring app charges are fixed. Shipping labels you buy through Shopify grow with orders. Shopify Payments card fees grow too, but come out of your payouts, not your bills, as Shopify's help notes. On each product, enter what one unit cost you in "Cost per item", under Price. The Finance Summary report, under Analytics then Reports, shows the month's sales to check against your break-even.
How do you lower your break-even point?
Raise what each order leaves, through price or a bigger average order value, or cut fixed costs. An order that adds a $16 item costing you $8, packed in the same box, leaves about $32 instead of $24. If every order did, $3,600 ÷ $32 is 112.5, so 113 orders would cover the month. A 10% discount pulls the other way. The $64 order sells for $57.60 with costs near $40, so it leaves about $17.60 and break-even climbs to 205 orders.
A second item in the box, with Sledge
Sledge does not work out your break-even point or read your costs. Sledge bundles include add-ons, which offer shoppers a second item on the product page. From the Pro plan up, Growth Intelligence totals what its suggested fixes could add in sales as one dollar figure, labeled "Est. potential". It estimates sales, not profit.
