Break-Even for a Shop: Units, Fixed Costs, and Contribution

Break-even asks a blunt question: how many units (or how many dollars of sales) until contribution covers the fixed costs you chose to put in the bucket? It is not a forecast of demand. It is a floor check before you reprint tags or sign a lease.

The formula

Contribution per unit = price − variable cost per unit. Break-even units = fixed costs ÷ contribution. Break-even revenue = units × price. If contribution is \$0 or negative, there is no break-even — every sale digs deeper.

Worked example

Rent + utilities + software = \$4,000/month fixed. Candle sells at \$24. Wax, jar, label, and shipping to the customer average \$9 variable. Contribution = \$15. Units = 4000 ÷ 15 ≈ 267 units that month. Revenue at break-even ≈ \$6,408. Sell 200 and you are still short; the math does not care about hope.

What belongs in fixed vs variable

Fixed: rent, base salaries, insurance, subscriptions that do not move with one more unit. Variable: materials, per-order shipping you eat, marketplace commissions, payment processing on that order. Mixed costs (an employee who packs orders) — split honestly or put the packing piece into variable so you do not lie to yourself.

One product vs a whole shop

The simple calculator assumes one contribution figure. A real shop blends SKUs. Either run break-even on your hero product, or invent a blended contribution (average price − average variable) and treat it as a planning sketch — not a GAAP statement.

Fees and tax

If the listed price is \$24 but Etsy keeps \$3 and you still owe materials, variable is higher than “COGS on the packing slip.” Put the fee into variable or lower the net price you use in the formula. Sales tax you collect and remit is usually not your revenue — do not treat tax-inclusive totals as price unless you reverse the tax first.

Tools

Break-even point for units. Break-even calculator when you also want sales dollars. Break-even analysis if you want profit at an expected volume after the floor.

What this skips

Seasonality, ramp-up, debt service unless you added it to fixed, and inventory financing. Shop arithmetic for planning — not a loan model or tax advice.