Break-even point for an online store: how much you need to sell each month to cover your costs

The break-even point is the revenue at which your store breaks even: break-even point = fixed expenses ÷ contribution margin. A store with R$ 7.200 in fixed expenses and a 16,4% contribution margin needs R$ 43.902 in monthly revenue just to cover its bills. With an average order value of R$ 80, that’s 549 sales. Anything above that is profit; anything below is a loss, no matter how good the revenue looks.

It’s the number I most wish every seller knew by heart, because it turns a vague question ("Is business going well?") into a concrete target: how many sales per day it takes to cover operating costs.

#The break-even point formula

There are two versions, depending on what you want to know:

• In revenue: fixed expenses ÷ contribution margin (as a decimal).
• In number of sales: fixed expenses ÷ average contribution per sale (in reais).

Fixed expenses are costs you have even when you make no sales: staff, rent, software, accountant, internet, and owner’s pay.

Contribution margin is what each sale leaves after all variable costs: product cost, commission, shipping, tax, packaging, listing, and returns. I explain how to calculate it in gross, contribution, and net margin.

#Example: a marketplace store

If this store brings in R$ 80 mil in revenue, it’s R$ 36 mil above its break-even point, and that R$ 36 mil generates about R$ 5.900 in profit (16,4% of it). It’s the same store as in the sample income statement.

#What changes the break-even point

The break-even point is highly sensitive to contribution margin. For the same store, with the same fixed expenses:

Three more listing points require R$ 10 mil more in revenue just to break even. A blanket 5% promotion may require R$ 11 mil more because almost the entire discount comes out of your contribution margin: commission and tax drop a little along with the price, but product cost and shipping don't. That's why listing and discount decisions need to focus on margin, not volume. I showed the effect of discounts in how to calculate profit and profit percentage.

In the other direction, each point of contribution margin you recover lowers the revenue you need. Reviewing prices, cutting listings that don't pay for themselves, and reducing returns usually have a greater effect on the break-even point than cutting fixed expenses.

In practice. A seller of baby products hired two people for fulfillment, raising fixed expenses from R$ 6 mil to R$ 11 mil as sales grew. Their contribution margin was 14%. The break-even point jumped from R$ 43 mil to R$ 79 mil per month, while revenue was R$ 70 mil. The store started losing money while selling more than ever. Before letting anyone go, the seller reviewed prices for the 30 products with a contribution margin below 10%. The margin rose to 17%, the break-even point fell to R$ 65 mil, and the store was profitable again the following month.

#Daily break-even point: a goal you can track

Divide the break-even point by 30 to get a daily target. In this example, R$ 43.902 ÷ 30 = R$ 1.463 per day, or about 18 sales. Tracking this number throughout the month shows early on whether the store is on track to end in the black.

One thing to keep in mind: marketplace sales aren't consistent. Peak dates account for a large share of revenue, and slow months may fall below break-even. Compare the month's running total with the cumulative target, not a single day.

#Margin of safety

The margin of safety shows how much revenue can fall before the store starts losing money:

Margin of safety = (revenue − break-even point) ÷ revenue

For the store in this example: (R$ 80.000 − R$ 43.902) ÷ R$ 80.000 = 45%. Revenue can fall by almost half before the store starts losing money. A store with a 10% margin of safety is one bad week away from going into the red.

#Mistakes that distort the break-even point

• Using gross margin (product cost only) instead of contribution margin. This makes the break-even point look much lower than it really is.
• Leaving out owner compensation from fixed expenses.
• Not counting listing costs as variable costs. They grow with sales and need to be included in contribution margin.
• Calculating it once and forgetting about it. Contribution margin changes with price, campaigns, and costs, so the break-even point changes too.

#Your break-even point, updated automatically

Contribution margin is what changes the break-even point most, and it changes with every order. Milewa calculates the actual contribution margin of your Mercado Livre and Shopee sales, including fees, costs, tax, and Ads. With your fixed expenses entered in the Expenses module, it shows your net profit for the month. Track whether your store has passed its break-even point without waiting for month-end.