Chartered Financial Analyst specializing in retail sector analysis and small business inventory management.
Find out how many units your retail store needs to sell to cover all costs. Enter any three variables—Fixed Costs, Average Sale Price, Average Cost of Goods, or Units Sold—to solve for the fourth.
Retail Breakeven Calculator
Retail Breakeven Formula
The breakeven formula for a retail business finds the number of units (Q) you must sell for your total gross profit to cover your fixed costs (overhead).
Q = F / (P – V)
Solve for Fixed Costs (F):
F = Q * (P – V)
Solve for Average Sale Price (P):
P = (F / Q) + V
Solve for Average Cost per Unit (V):
V = P – (F / Q)
Variables Explained
- Fixed Costs (F): Total monthly overhead costs (e.g., store rent, employee salaries, utilities, insurance).
- Avg. Sale Price (P): The average price a customer pays for one item in your store.
- Avg. Cost per Unit (V): Your Cost of Goods Sold (COGS) for one item (e.g., what you paid the wholesaler, plus shipping).
- Breakeven Units Sold (Q): The number of items you must sell per month to reach $0 in operating profit.
Related Calculators
- Gross Profit Margin Calculator
- Inventory Turnover Calculator
- Cost of Goods Sold (COGS) Calculator
- Contribution Margin Breakeven Calculator
What is a Retail Breakeven Point?
The **Retail Breakeven Point** is the exact number of products a retail store must sell in a given period (usually a month) to cover all of its expenses. At this point, the store’s profit is $0. Every item sold *after* this point contributes directly to profit.
This is arguably the most critical number for any store owner. It separates “losing money” from “making money.” It’s governed by the relationship between fixed costs (like rent) and the profit on each item sold. This “profit-per-item” is the **Contribution Margin** (P – V), which represents the cash generated from a sale that can be used to pay the rent and salaries.
For example, if your store’s rent is $3,000 and your contribution margin (or gross profit) per item is $30, you must sell 100 items ($3,000 / $30) just to pay the rent. This calculator helps you find that number and experiment with how changing your price (P) or cost (V) affects your target.
How to Calculate Retail Breakeven (Example)
Let’s calculate the breakeven point for a small clothing boutique.
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Identify Fixed Costs (F):
The boutique’s total monthly fixed costs (rent, salaries, utilities) are $15,000.
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Identify Average Price (P):
After analyzing sales, the average price of an item sold (e.g., a dress, a shirt) is $50.00.
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Identify Average Cost (V):
The average cost to purchase that item from the manufacturer (COGS) is $20.00.
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin: $50.00 (P) – $20.00 (V) = $30.00.
Next, divide the fixed costs by this margin:
Q = $15,000 / $30.00 = 500 -
Conclusion:
The boutique must sell 500 items each month to cover all costs. The 501st item sold will be its first unit of profit.
Frequently Asked Questions (FAQ)
Fixed Costs are your overhead: store rent, full-time employee salaries, insurance, utilities, and marketing budgets. Variable Costs are almost exclusively your Cost of Goods Sold (COGS)—what you pay for the products you sell. Credit card processing fees are also a variable cost.
You must use averages. Calculate your *average* sale price (P) and your *average* cost of goods (V). This gives you a “breakeven in average units.” You can also use the Gross Profit Margin Calculator to find your breakeven point in *sales dollars*.
You have three options: 1) Decrease your Fixed Costs (F) by finding cheaper rent. 2) Decrease your Variable Cost (V) by finding cheaper suppliers. 3) Increase your Sale Price (P). This calculator lets you model all three scenarios.
This calculator finds the breakeven point in *units*. To find the breakeven point in *sales dollars*, you would simply multiply the resulting (Q) by your (P). In the example, it would be 500 units * $50/unit = $25,000 in monthly sales.