Break-even
How many orders a month before you are ahead?
Itemise the costs that do not move, describe one average order, and the count falls out of the two.
How do you work out break-even for an online shop?
Break-even is not a revenue figure, it is an order count, and it comes out of one number: what is left of an average order after the costs that move with it. Take the average order value, subtract what that order costs you to buy, pack and send, then subtract the payment fees. What remains is the contribution, and the orders you need are your fixed monthly costs divided by it. This calculator itemises those fixed costs, including a line for the software you sell on, and prints the contribution as money and as a share of the order so you can see which lever actually moves it. It also handles the case a spreadsheet hides: when the contribution is zero or below, no volume ever gets you there.
Your result
Enter an average order value and your fixed costs, and the answer appears here.
There is no break-even at any volume. An average order leaves you nothing once its own costs and its fees are paid, so every extra order adds to the loss rather than to the fixed costs. Raise the average order value, cut the cost of an order, or move to a cheaper fee rate. Volume will not fix this one.
With no fixed costs entered you are ahead on the first order. Add your subscriptions, premises and tools above to see the real number.
Orders a month to break even
| Fixed costs a month | |
|---|---|
| Average order value | |
| Cost per order | |
| Fees per order | |
| Contribution per order | |
| Contribution, as a share of the order | |
| Sales a month to break even | |
| Days at your current rate |
How this is worked out
Itemise the costs that do not move, describe one average order, and the count falls out of the two.
- contribution per order = average order value, minus the cost of that order, minus the percentage fee, minus the fixed fee
- orders needed = fixed costs a month, divided by the contribution, rounded up to a whole order
A worked example
Rounded up, because two thirds of an order does not exist and a break-even number that is not quite break-even is worse than no number at all. If the contribution is zero or negative the division has no useful answer, and the calculator says so in words. That is the single most valuable thing this sum can tell anybody, and it is exactly the thing a spreadsheet with a division in it hides behind a very large number.
What this assumes
- Fixed costs stay fixed. In practice they step: a fulfilment tier, a higher plan band, a second member of staff. This sum does not model the step.
- One average order stands in for the whole distribution. If your orders vary widely, the true break-even is higher than an average suggests.
- Tax is excluded from the average order value, because it is collected on somebody else's behalf and is not yours to contribute.
- The software line is prefilled with Crate's own published price for your market, so the calculator counts the cost of the thing you are reading it on. Overwrite it with whatever you actually pay.
Questions about this calculator
Short answers, and none of them hedge. If yours is not here, ask us on the contact page.
Should the subscription I pay for my shop count as a fixed cost?
Yes. It is charged whether you sell anything or not, which is the definition being used here. It is also why this calculator prefills the line with Crate's own price rather than quietly leaving it out: a break-even that omits the software you are reading it on is not a break-even.
What is contribution, and why not just use profit?
Contribution is what one order leaves behind to put toward the costs that do not move. Profit only exists once the fixed costs are covered, so it cannot be the thing you divide by. Contribution is the per-order number, profit is the month-end number, and mixing them is the usual reason a break-even comes out wrong.
The calculator says there is no break-even. Is that a bug?
No, it is the answer. It means an average order costs you more to fulfil and process than it brings in, so selling more of them loses more money. The fix is on the order rather than on the volume: a higher average order value, a lower cost per order, or a cheaper fee rate.
Why is the answer rounded up?
Because you cannot take a fraction of an order. Rounding down would print a figure at which you are still slightly behind, and a number that is nearly break-even is the one number this page must not print.
Does this include tax?
No, and deliberately. Tax you collect is not revenue and tax you pay on profit only applies once there is profit, which is by definition after the point this calculator is finding. Put the average order value in excluding tax and the answer is the one you want.
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