A business has two ways to calculate its break-even point: in units and sales. You can use a unique BEP formula to calculate your break-even point for either scenario.
Calculate your break-even point in units
Calculating your break-even point (BEP) in units means calculating the number of units you need to sell to come to a neutral financial position. This is established through the following formula:
Break-Even Point (units) = Fixed Costs ÷ (Revenue Per Unit – Variable Cost Per Unit)
Calculate your break-even point in sales value
Alternatively, ecommerce businesses can choose to calculate their break-even point (BEP) in sales value:
Break-Even Point (Sales in GBP) = Fixed Costs ÷ Contribution Margin
Contribution margin here refers to your product’s selling price less variable costs per unit. Once you have calculated your BEP, you can use it to set your sales target, explore possible cost cutting measures and evaluate the need to raise your prices.
How to calculate your break-even point: A guide for ecommerce businesses
Our comprehensive guide covers everything you need to know about calculating your break-even point as an ecommerce business owner.
- What is a break-even point?
- Advantages of calculating a break-even point
- How to calculate your break-even point
- How to calculate a break-even point with multiple products
- Break-even point examples
- How to calculate a break-even point in Excel
- What are the limitations of a break-even analysis
- How to reduce your break-even point
- How often should you calculate your break-even point?