Chartered Financial Analyst specializing in e-commerce financial modeling and direct-to-consumer (DTC) operations.
Find out how many orders your e-commerce store needs to ship to cover its fixed costs. Enter any three variables—Fixed Costs, Average Order Value (AOV), Average Variable Cost, or Number of Orders—to solve for the fourth.
E-commerce Breakeven Calculator
E-commerce Breakeven Formula
The breakeven formula for an e-commerce business finds the number of orders (Q) you must ship for your total gross profit to cover your fixed operational costs.
Q = F / (P – V)
Solve for Fixed Costs (F):
F = Q * (P – V)
Solve for Avg. Order Value (P):
P = (F / Q) + V
Solve for Avg. Variable Cost (V):
V = P – (F / Q)
Variables Explained
- Fixed Costs (F): Total monthly overhead costs (e.g., Shopify fees, marketing salaries, software, warehouse rent).
- Avg. Order Value (P): The average revenue you receive from a single order (Total Revenue / Total Orders).
- Avg. Variable Cost (V): Your cost for a single order (COGS + Shipping + Transaction Fees).
- Breakeven Orders (Q): The number of orders you must ship per month to reach $0 in operating profit.
Related Calculators
- Average Order Value (AOV) Calculator
- Customer Acquisition Cost (CAC) Calculator
- Retail Breakeven Calculator
- Gross Profit Margin Calculator
What is an E-commerce Breakeven Point?
The **E-commerce Breakeven Point** is the specific number of orders an online store must fulfill each month to cover all its costs. This is the moment when the business stops losing money and starts becoming profitable. Every order *after* the breakeven point contributes directly to profit.
For an online store, the variables are slightly different than for a physical retailer. The “Price” (P) is best represented by the **Average Order Value (AOV)**, since customers may buy multiple items. The “Variable Cost” (V) is not just the cost of the products (COGS) but *must* also include the costs of shipping, packaging, and payment processing fees for that order.
This calculation is critical for managing cash flow and ad spend. It answers the question, “How many orders do I need to generate from my ad campaign to cover my monthly Shopify bill and warehouse costs?” The profit per order, known as the **Contribution Margin** (P – V), is the engine that pays all these fixed costs.
How to Calculate E-commerce Breakeven (Example)
Let’s calculate the breakeven point for a new Shopify store.
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Identify Fixed Costs (F):
The store’s total monthly fixed costs (Shopify plan, app fees, marketing agency, warehouse space) are $5,000.
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Identify Average Order Value (P):
After a month of sales, the store’s AOV is $75.00.
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Identify Average Variable Cost (V):
The average COGS for items in an order is $20, shipping is $7, and transaction fees are $3. Total (V) = $30.00.
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per order: $75.00 (P) – $30.00 (V) = $45.00.
Next, divide the fixed costs by this margin:
Q = $5,000 / $45.00 ≈ 111.11 -
Conclusion:
The e-commerce store must ship 112 orders (rounding up) each month to cover all costs. The 113th order will be its first order of profit.
Frequently Asked Questions (FAQ)
Fixed Costs are monthly overhead: e-commerce platform fees (e.g., Shopify, BigCommerce), software/app subscriptions, employee salaries, and warehouse rent. Variable Costs are tied to each order: Cost of Goods Sold (COGS), shipping/packaging, and payment processing fees.
This is complex. If you have a stable, fixed monthly ad budget, you can include it in (F). However, if your ad spend is variable (e.g., a % of sales, or a cost-per-click), it’s more accurate to add it to your (V) as a “Customer Acquisition Cost” (CAC).
This calculator is perfect for that. See how increasing your (P) by $10 (due to a higher AOV from the free shipping offer) impacts your breakeven (Q). If (Q) drops significantly, the threshold is likely profitable, as long as the shipping cost is already included in (V).
Your contribution margin (P – V) is likely too low. You must find a way to either increase your Average Order Value (P) through upselling/bundles, or decrease your Variable Costs (V) by finding cheaper suppliers or shipping options.