Break-even calculator

How it is worked out

• Left per order = order value times margin before ads, minus ad cost per order.
• Orders to break even = monthly fixed costs divided by what is left per order.
• Revenue to break even = those orders times order value.

Example: a $40 desk organizer store

• Staff, rent and apps cost $6,000 a month.
• Each order leaves $16.00 before ads and $4.00 after a $12.00 ad cost.
• The store needs 1,500 orders a month, 50 a day and $60,000 in revenue just to break even.
• Cut ad cost per order by $2 and break-even drops to 1,000 orders. Small changes per order move the whole month.

Questions

How do you calculate break-even point in units?

• Monthly fixed costs divided by what each order leaves after all its costs, ads included.
• $6,000 / $4.00 = 1,500 orders a month.

How do you calculate break-even point in dollars?

• Break-even orders times average order value.
• 1,500 orders at $40 is $60,000 a month.

What is the break-even point for an online store?

• The number of orders a month at which the margin left after ads covers your fixed costs.
• Every order above it is profit.

Should ad spend be a fixed cost?

• For most stores, no. Ad spend rises with orders, so it is counted per order here.
• Fixed costs are what you pay even with zero orders.

How do I lower my break-even point?

• Raise what each order leaves after ads: lower ad cost per order, raise order value, cut product and shipping cost.
• Cutting fixed costs helps too, but per-order changes usually move it more.