Break-even point
The break-even point is the number of delivered orders at which revenue equals all costs, with zero profit and zero loss. It's calculated by dividing monthly fixed costs by the margin remaining per delivered order after variable costs. Every order above this number adds profit equal to its margin; every order below leaves you covering uncovered fixed costs.
Also calledbreak-even thresholdbalance pointbreak-evenbreak-even level
The formula
Break-even point (orders) = Monthly fixed costs ÷ Remaining margin per delivered order
- Fixed costs: subscriptions, tools, rent, and fixed salaries—what you pay whether you sell or not.
- Remaining margin per order: selling price minus product cost, shipping, packaging, return costs, and advertising cost per order.
- Result is delivered orders per month, not confirmed orders.
Worked example
A Moroccan store with 9,000 MAD in fixed costs
- 1Monthly fixed costs: 9,000 MAD (subscriptions, tools, confirmation staff salary).
- 2Total margin per delivered order: 160 MAD.
- 3Advertising cost per order: 85 MAD, leaving 160 − 85 = 75 MAD per order.
- 4Break-even point: 9,000 ÷ 75 = 120 delivered orders per month.
- 5At 150 delivered orders: (150 × 75) − 9,000 = 2,250 MAD profit.
Takeaway: Break-even is 120 delivered orders per month, or 4 per day; every additional order after that adds 75 MAD net.
What it means in practice
Break-even is measured in delivered orders, not confirmed orders. At a 60% delivery rate you need 200 confirmed orders to reach 120 delivered, which changes your ad budget and inventory planning.
Any new fixed cost raises the break-even point instantly. A 600-MAD monthly subscription on a 75-MAD remaining margin means eight extra orders every month just to cover it.
Raising your margin lowers break-even without selling a single extra unit. At 75-MAD margin you need 120 orders to cover 9,000 MAD; at 100 MAD you need only 90.
Calculate using your actual sales mix. If 70% of orders are your lowest-margin product, using your store average gives you a break-even point too low to reach in reality.
Common mistakes
- Calculating break-even using total margin without subtracting advertising cost per order, which gives you a low point you'll never actually reach.
- Forgetting that inventory is money paid upfront: you might hit break-even on paper while unable to replenish stock.
- Treating commissions tied to order count as fixed costs, so your costs rise with volume but don't show in the calculation.
- Ignoring seasonality: a break-even calculated on a peak month collapses in a slow month with the same fixed costs.
Questions and answers
How do I calculate break-even for my store?
Sum your monthly fixed costs, then calculate what's left from each delivered order after product, shipping, packaging, returns, and ads. Divide fixed by remaining margin and you get the number of delivered orders that exactly covers your costs.
Is break-even measured in orders or money?
Both work. In orders you divide fixed by margin per order; in money you divide fixed by margin as a percentage of selling price and get required revenue. Cash-on-delivery merchants usually find orders easier to track daily.
What happens to break-even if delivery rate drops?
It rises from two directions at once: every rejected parcel adds shipping cost deducted from successful order margins, and you need more confirmed orders to reach the same number delivered. Recalculate break-even whenever delivery rate moves.
Should I include inventory cost in fixed costs?
No. Inventory cost is a variable cost already deducted inside each order's margin. But it drains cash upfront, so track it in cash planning, not break-even, or you'll count it twice and distort the number.
Sources
- 1.Cash-on-delivery profit calculator · SymplysisAI