What it calculates
Use the result as a scenario, not a black box
Break-even analysis compresses a complicated store into a simple question: how many average sales are needed to cover fixed costs? It is especially useful for scenario testing because you can see how changes in average order value, product cost or rent affect the required volume.
How the math works
Contribution per sale = selling price − variable cost. Contribution margin = contribution ÷ selling price. Break-even units = fixed costs ÷ contribution. Break-even revenue = break-even units × selling price.
Example
With $85,000 in monthly fixed costs, a $55 average sale and $30 of variable cost, each sale contributes $25. Break-even volume is 3,400 sales per month, equal to about $187,000 in revenue.