To calculate your break-even point in units, divide your total fixed costs by the selling price per unit minus the variable cost per unit. To get it in sales, divide total fixed costs by your contribution margin ratio.
Shopify defines the break-even point as the exact point where total revenue equals total costs, leaving zero net income. You're not losing anything, but you haven't made a profit yet either. The formula works the same in whatever currency you trade. The worked examples on this page use the sources' own US dollar figures, as of October 2026.
Fixed costs and variable costs
Everything depends on sorting your costs into two groups, and Shopify's examples help:
| Cost type | How it behaves | Examples |
|---|---|---|
| Fixed | Stays the same whatever your sales volume | Leases, full-time admin payroll and retainers, domain hosting, recurring subscriptions |
| Variable | Rises and falls with order volume | Fulfilment, shipping, payment processing fees, ad spend tied to winning customers |
The break-even formula, in units and in sales
- Break-even units = total fixed costs / (selling price per unit - variable cost per unit).
- The bit in brackets is the unit contribution margin, so the formula shortens to total fixed costs / unit contribution margin.
- Break-even sales = total fixed costs / contribution margin ratio.
- Contribution margin ratio = unit contribution margin / selling price per unit.
CFI's rule ties it together. You make a profit when revenue is higher than your variable plus fixed costs, you break even when they're equal and you make a loss when revenue falls short. Plot revenue and total costs on a chart and the point where the lines cross is the break-even point. CFI calls it a break-even chart or cost-volume-profit graph.
Two worked examples side by side
Shopify's example is a business it calls ABC Shipfast, working per quarter. Its fixed costs are $2,400 for the warehouse, $600 for the platform and apps, $1,500 for admin salaries and $500 for insurance and software, which comes to $5,000. Its variable cost per unit is $72 + $6 + $16 + $6 = $100, and it sells at $200.
CFI's example is Company A, which sells water bottles. Its fixed costs of $100,000 cover property taxes, a lease and executive salaries. Each bottle costs $2 in variable costs and sells for $12.
| Input | Shopify example (per quarter) | CFI example |
|---|---|---|
| Total fixed costs | $5,000 | $100,000 |
| Selling price per unit | $200 | $12 |
| Variable cost per unit | $100 | $2 |
| Unit contribution margin | $100 | $10 |
| Break-even units | 50 | 10,000 |
| Break-even sales | $10,000 | $120,000 |
For Shopify's business, $5,000 / $100 = 50 units. The contribution margin ratio is $100 / $200 = 0.5, so the sales version is $5,000 / 0.5 = $10,000. For CFI's, $100,000 / ($12 - $2) = 10,000 units. At that volume revenue is 10,000 x $12 = $120,000, which exactly covers $20,000 of variable costs plus $100,000 of fixed costs.
How to calculate your own break-even point
- Add up all your fixed costs for the period.
- Work out the variable cost of one unit.
- Subtract the variable cost from the price to get your unit contribution margin.
- Divide fixed costs by the contribution margin to get break-even units.
- Multiply units by price, or divide fixed costs by the contribution margin ratio, to get break-even sales.
Shopify adds a quick third check in its FAQ: an online athletic shoe seller with monthly fixed costs of $2,500, an average price of $125 and variable costs of $100 a pair has a margin of $25 per pair. $2,500 / $25 = 100 pairs a month just to cover costs.
If you'd like the calculation inside a wider set of accounts, a profit and loss template gives you the fixed and variable lines to pull from. CFI notes that analysts often use Goal Seek in Excel to back-solve how many units need selling, at what price and at what cost, to break even.
The catch: the break-even point moves
Your break-even point isn't a fixed fact about your business. CFI lists what moves it: higher sales demand needs more production and so raises it, and an increase in production costs raises it too. The formula also assumes your price and costs hold steady across the volume you're modelling, so rerun it whenever either changes.
Want AI doing the heavy lifting in your marketing?
I build the systems that handle the boring 80 percent, so you get your week back. Done properly, with the human kept in.
Shopify gives four ways to bring it down:
- Raise prices. A modest 5% to 10% rise on core products lowers the sales volume you need.
- Cut variable costs. Volume discounts, lighter packaging and regional vendors.
- Reduce fixed overhead. Cancel unused subscriptions, renegotiate leases and consolidate apps.
- Improve your sales mix. Push your higher-margin products.
Why it's worth doing before you need it
Shopify cites US Small Business Administration Office of Advocacy data showing only about half (49.2%) of new employer establishments survive past five years, which is why it argues for pinning down your required sales volume early. It says a regular break-even analysis helps with pricing, with turning revenue targets into units per sales cycle, with testing growth plans before you sign a lease or hire, and with showing lenders you understand your costs. If you're writing that up for a lender, it belongs in your business plan.
Where I come in
Pricing and offers are where marketing and this formula meet. I help small businesses and SaaS marketing teams position an offer so it can carry a higher price, and plan the promotion that gets them past the break-even number. You can see how I work on my work with me page.
My verdict on break-even analysis
Run the numbers before you set a price or sign a lease. One figure tells you how many sales keep the lights on, and it's sobering how often that figure is higher than people expect. Then look at the four levers. Most businesses I talk to reach for cost cuts first, when a small price rise would have moved the number further.
Frequently asked questions
What is the formula for break-even point?
Break-even units equal total fixed costs divided by the selling price per unit minus the variable cost per unit. Break-even sales equal total fixed costs divided by the contribution margin ratio.
What happens at the break-even point?
Total revenue equals total costs, so profit is zero. Above it you make a profit and below it you make a loss.
What is a contribution margin?
The selling price per unit minus the variable cost per unit. It's the amount each sale contributes towards covering fixed costs.
How can I lower my break-even point?
Shopify suggests raising prices, cutting variable costs, reducing fixed overhead and shifting your sales mix towards higher-margin products.
