Enter fixed costs, price, variable cost per unit and what acquisition costs you. The page returns break-even units, break-even revenue and how far last month sat from the line.
Contribution per unit is what one sale hands to the business after the costs that sale caused. Stack up enough of those contributions to cover the costs that would exist anyway and you are at break-even.
Note what the formula does not contain: any notion of time. Break-even is a volume, not a date. Turning it into a date requires a sales rate you are willing to defend.
The split is the whole calculation, and it is the only place the answer can go badly wrong.
Fixed. Rent. Salaried staff. Software subscriptions. Insurance. Accounting. These are the same figure whether you sell four hundred units or two thousand, at least until you outgrow the warehouse.
Variable. The landed cost of the product. Packaging. Payment processing. Outbound shipping you pay for. Pick and pack. Sales commission. Every one of these arrives attached to an order and disappears if the order does not happen.
Two cases sit awkwardly between the columns and both matter more than they look.
Hourly and shift labour. Fixed in a quiet week, variable across a season. If you staff up for volume, treat the flexible portion as variable and leave the core team in fixed.
Software priced per order or per seat. A helpdesk billed per ticket behaves like a variable cost. Amortise it across the orders it serves rather than parking the whole invoice in overheads.
Most break-even calculators put marketing in the fixed column, or leave it out entirely. For a business that buys its customers, that is the single assumption that makes the output useless.
A monthly ad budget looks fixed because it is set monthly. What it actually buys is customers, one at a time, at a cost per acquisition. Sell twice as many units and you will have spent roughly twice as much acquiring them. That is the definition of a variable cost, and it belongs next to the cost of the product.
The worked example shows the size of the difference. An $86 unit with $48.20 of goods, shipping and fees contributes $37.80. Against $22,000 of fixed costs, break-even is 582 units.
Add the $22.99 it costs to acquire each of those customers and contribution falls to $14.81. Break-even moves to 1,485 units, or $127,700 of revenue. The same business, the same prices, the same overheads, and a target two and a half times higher.
If some of your sales arrive without advertising, use a blended ad cost per unit across all orders rather than the paid-only CPA. The number will be lower and the break-even point more honest.
| Contribution per unit | Break-even units | Break-even revenue at $86 |
|---|---|---|
| $5.00 | 4,400 | $378,400 |
| $10.00 | 2,200 | $189,200 |
| $14.81 | 1,486 | $127,796 |
| $20.00 | 1,100 | $94,600 |
| $25.00 | 880 | $75,680 |
| $30.00 | 734 | $63,124 |
| $37.80 | 582 | $50,052 |
| $50.00 | 440 | $37,840 |
The curve is the point. Between $50 and $30 of contribution the target rises by a couple of hundred units. Between $10 and $5 it doubles outright. Businesses running on thin contribution do not fail because they missed the target by a little; they fail because a small movement in contribution moves the target by an amount no sales push can cover.
Which also tells you where to spend effort. Raising contribution by two dollars a unit is worth more at the bottom of this table than any amount of extra volume.
Break-even is the point where the business stops destroying money. Planning to arrive there is planning to earn nothing.
The number is a floor, not a target. A plan that lands exactly on break-even has produced a year of work, a year of risk and no profit. Set the goal at break-even plus whatever the business is supposed to earn, and treat the calculated figure as the line below which nothing else matters.
The second failure is treating it as a constant. Break-even was computed in January, printed, and pinned above the desk. Since then the supplier raised prices four percent, a new tool went on the fixed line, and cost per acquisition drifted from $19 to $23 as the account matured. The pinned number says 1,200 units and reality says 1,600, and nobody recalculated because the formula felt like it had been settled.
Recompute it whenever price, supplier cost, acquisition cost or the fixed base moves. On a business buying traffic, that is monthly, because the acquisition cost input almost never holds still.