Break-even
Price
The price that covers product cost may still lose money on every order.
Your break-even price is the minimum selling price that covers product cost, per-order expenses and percentage-based fees. This lesson shows Shopify merchants how to calculate that threshold correctly, stress-test it and avoid sales that increase revenue while quietly creating losses.
The entire lesson in 60 seconds.
Break-even price is the minimum selling price that covers every variable cost attached to an order. Calculating it from product cost alone creates a false floor and can make apparently profitable sales lose money.
Break-even price is your minimum sustainable price
At the break-even price, revenue covers the product, fulfillment and other variable order costs exactly. The sale produces neither a profit nor a loss.
Product cost alone does not define the floor
Packaging, fulfillment, shipping subsidies and other costs triggered by the order must be added to COGS before the sustainable threshold can be calculated.
Percentage-based fees change the formula
Payment and marketplace fees increase as the selling price increases. They belong in the denominator, not as a fixed amount guessed before the final price is known.
Discounts can push a product below break-even
A full-price product may cover its costs while a promotion turns every discounted order into a loss. The break-even price is the floor a campaign must respect.
Breaking even is not the same as being profitable
The break-even price prevents a unit-level loss but leaves nothing for fixed operating costs or profit. A sustainable target price must sit above this threshold.
Break-even tells you the lowest price you can accept without losing money. It does not tell you the price your business should aim to charge.
Covering product cost can still leave every order at a loss.
A price above Cost of Goods Sold may appear sustainable while packaging, fulfillment and payment fees remain uncovered. The complete break-even calculation shows the minimum price required for the entire order to pay for itself.
Which price actually covers every variable cost?
A price above COGS can still lose money.
At $39, the product leaves $7 above its $32 COGS, but $8 of per-order costs and a 3% payment fee turn the sale into a $2.17 loss. Dividing the $40 fixed variable cost by 0.97 produces the correct $41.24 break-even price.
Covering product cost is not the same as breaking even.
COGS is only the first cost layer. A complete price floor must also cover the expenses triggered by each order and the fees calculated as a percentage of revenue. The correct decision begins with the complete economics of the sale, not product cost alone.
Every cost layer changes the minimum sustainable selling price.
Start with the product cost, add every fixed amount triggered by the order and then adjust for fees charged as a percentage of revenue. Leaving out any layer creates a break-even price that is too low.
The anatomy of a $41.24 break-even price
Follow the seven steps from a $32 product cost to the exact price required to cover the complete economics of one Shopify order.
Product cost
The merchant pays $32 to source or manufacture the product.
Packaging cost
Packaging adds another $3 whenever an order is prepared.
Fulfillment and shipping
Fulfillment and the merchant-funded shipping share add $5.
Fixed variable cost
Product and per-order costs total $40 before percentage fees.
Percentage fee rate
Payment processing consumes 3% of the final selling price.
Revenue share retained
After the 3% fee, 97% of the selling price remains to cover costs.
Break-even price
Divide $40 by 0.97 to calculate the exact sustainable price floor.
The direct cost of sourcing or manufacturing one sellable unit.
Packaging, fulfillment and shipping costs triggered by the sale.
The share of revenue removed by payment processing on the order.
The minimum price that covers every included variable cost exactly.
Percentage fees belong in the denominator.
Fixed costs can be added before the price is known. Percentage-based fees cannot, because their dollar amount changes with the selling price. Divide total fixed variable costs by the share of revenue retained after those fees.
Break-even begins before the formula.
The result is only reliable when every sale-linked cost is captured and allocated correctly. Product cost defines the starting point; per-order expenses complete the fixed variable cost base.
Include Every Sale-Linked Cost
A break-even calculation must include every cost that occurs because the order exists. Product cost is the largest layer, but packaging, fulfillment and merchant-funded shipping also require revenue.
$32 product cost + $3 packaging + $5 fulfillment and shipping = $40 of fixed variable cost that each single-unit order must recover.
Build the cost base correctly
Allocate Order Costs by Unit
Packaging and fulfillment may be charged once per order rather than once per product. Their per-unit impact therefore changes with basket size and should not be copied blindly across every quantity scenario.
An $8 per-order cost allocated across two units becomes $4 per unit. On a single-unit order, the same expense remains $8 and produces a higher break-even price.
Allocate order costs realistically
Why Fees Change the Denominator
Payment and marketplace fees are calculated from the selling price itself. Because their dollar value is unknown until the price is known, they cannot be added to costs as a guessed fixed amount.
The store retains 97% of the selling price after a 3% fee. Dividing the $40 fixed variable cost by 0.97 produces a break-even price of $41.24.
Handle percentage fees correctly
When a Discount Crosses the Floor
A product can cover every cost at full price and still lose money during a promotion. The discounted price must be compared with break-even—not merely with COGS or the original list price.
With a $41.24 break-even price, a $49 product can absorb a discount of approximately 15.8%. A 20% promotion lowers the price to $39.20 and creates a $1.98 loss after the 3% fee.
Protect the floor before discounting
Four break-even concepts explained. Three remain.
You can now build the complete fixed cost base, allocate order costs and adjust for percentage fees. The next examples will apply this logic to missing costs, false floors and ongoing price protection.
How MarginLab evaluates break-even exposure across a Shopify catalog.
Break-even analysis should identify which products cover their complete variable economics, which rely on incomplete cost data and which have fallen below their sustainable floor after costs or discounts changed.
The figures below are a mathematically consistent educational example, not live data from the visitor's store.
Most products cover their recorded COGS, but missing order costs and outdated thresholds leave part of the catalog exposed to loss-making sales.
Active Shopify products included in the example.
Nine products sell below their complete variable cost floor.
Average loss per affected order at current selling prices.
Six products have incomplete or outdated sale-linked costs.
Missing Cost Layers
Some products include COGS but omit packaging, fulfillment or merchant-funded shipping. Their displayed margin looks positive while the complete order economics remain below break-even.
Complete the cost base for every product and variant before trusting its price floor or approving a discount.
COGS Mistaken for the Floor
A price above product cost is sometimes treated as safe even though additional order costs and percentage fees remain unpaid. Revenue exceeds COGS, but the order still loses money.
Compare current selling price with the complete break-even threshold, not only with COGS or gross profit.
Break-even Threshold Not Updated
Supplier, fulfillment and payment costs change over time. A floor calculated from old inputs can remain in a spreadsheet long after the product has become loss-making at its current price.
Recalculate the threshold whenever product cost, fulfillment, shipping support or transaction fees change materially.
Build the floor from complete costs. Validate it against every selling price.
Break-even protection depends on complete inputs and current thresholds. Review exposed products first, repair missing cost data and then compare full-price and discounted sales with the updated floor.
This sample diagnosis illustrates how incomplete costs and outdated thresholds can hide loss-making sales. MarginLab analyzes connected Shopify sales and available product cost data; merchants must still validate the operational inputs required for their own complete break-even model.
How to calculate a sustainable break-even price.
A reliable price floor starts with complete product and order costs, then adjusts for fees charged as a percentage of revenue. The result shows the minimum price that prevents each included sale from generating a loss.
A practical six-step break-even plan
Follow these six steps to turn complete variable costs into a defensible price floor, test that threshold and keep it current as store economics change.
Start with accurate product cost
Accurate Cost of Goods Sold is the foundation of the break-even calculation. If product or variant costs are missing or outdated, every later step produces a false price floor.
Add every fixed per-order cost
Add the costs triggered when the order is packed and fulfilled. Packaging, pick-and-pack charges and merchant-funded shipping must be recovered alongside product cost.
Calculate the combined percentage fee rate
Combine the payment and marketplace fees calculated from revenue. These percentages determine how much of the final selling price remains available to cover fixed variable costs.
Calculate and verify the break-even price
Divide fixed variable costs by the share of revenue retained after percentage fees. With $40 of fixed variable cost and a 3% fee, the break-even price is $41.24.
Stress-test discounts and cost changes
A price that covers costs today may fall below break-even after a discount or supplier increase. Test realistic scenarios before approving promotions or relying on the current threshold.
Monitor and update every threshold
Break-even is not a one-time calculation. Product cost, fulfillment, shipping support and fee structures change, making an old threshold unreliable even when the list price stays unchanged.
Calculate the floor once. Protect it continuously.
Start with accurate COGS, add every order cost, adjust for percentage fees and verify the result. Then test discounts and update the threshold whenever the economics of the sale change.
How an incomplete price floor can turn Shopify sales into losses.
A price can sit above product cost and still fail to cover the complete order. This educational example shows how adding missing costs and percentage fees changes the true break-even threshold.
The figures below describe a mathematically consistent pricing example and do not represent guaranteed MarginLab results.
The corrected threshold removes the $2.17 loss from each equivalent order.
The selling price rises from $39 to the exact $41.24 break-even floor.
Revenue after the percentage fee now covers all $40 of fixed variable cost.
Two hundred equivalent orders no longer accumulate $434 in unit-level losses.
How the complete break-even price was calculated
The correction follows five checks that move from complete costs to a verified zero-profit threshold.
Confirm product cost
Start with the complete and accurate product cost before building the selling price.
$32 COGSAdd per-order costs
Add packaging, fulfillment and merchant-funded shipping triggered by the order.
+$8 costsConfirm percentage fees
Combine fees charged from revenue and calculate the share of selling price retained.
3% fee · 97% retainedCalculate the price floor
Divide the $40 fixed variable cost by the 97% revenue share retained.
$41.24 priceVerify zero profit or loss
$41.24 minus the $1.24 payment fee leaves exactly $40 to cover the included costs.
$0.00 resultThe correction prevents a loss. It does not create a profitable target price.
Break-even identifies the lowest sustainable price under the stated assumptions. It leaves nothing for fixed operating expenses or profit. Use the threshold as a floor, then build the strategic selling price above it.
Is your Shopify price floor built correctly?
Use this checklist to verify that every variable cost is captured, percentage fees are handled correctly and the resulting threshold is monitored consistently. A price floor is not reliable until the complete order economics have been tested.
Product cost foundation
Every product has an accurate cost
Every product and variant needs a reliable COGS value before its break-even threshold can be calculated.
Costs are updated when suppliers change prices
Pricing calculations should always reflect the latest supplier, manufacturing and packaging costs.
COGS is classified consistently
Comparable products should use the same method for supplier, manufacturing and direct product costs.
Per-order cost completeness
Packaging costs are included
Materials used to prepare and protect the shipment must be recovered by the order.
Fulfillment costs are included
Pick-and-pack, handling and other fulfillment charges should be included when the order triggers them.
Shipping subsidies are included
Any shipping amount paid by the merchant must be allocated to the relevant order or scenario.
Percentage-based fees
Every revenue-based fee is listed
Payment, marketplace and other fees charged as a percentage of revenue must be identified.
Fixed and percentage fees are separated
Fixed transaction amounts belong with costs; revenue-based percentages belong in the denominator.
The retained revenue share is verified
Subtract the combined fee rate from 100% and convert the retained share to a decimal.
Break-even calculation
Fixed variable costs are totaled
Product cost and every fixed per-order amount must be combined before applying the fee adjustment.
The complete formula is used
Use Break-even Price = Fixed Variable Costs ÷ (1 − Percentage Fee Rate).
The zero-profit result is verified
Subtract every included cost and fee from the calculated price to confirm a result of zero.
Pricing stress test
Discounted prices are compared with the floor
Simulate planned promotions and confirm that the reduced price does not cross break-even.
Supplier and fulfillment increases are simulated
Test how higher COGS or order costs change the minimum sustainable selling price.
Basket-size assumptions are tested
Reallocate per-order costs for single units, multipacks, bundles and realistic order quantities.
Ongoing threshold monitoring
Current prices are reviewed regularly
Compare full and discounted selling prices with the latest break-even threshold for each product.
Cost changes are compared over time
Period comparisons reveal whether supplier, fulfillment, shipping or fee changes have moved the floor.
Break-even exposure leads to action
Each exposed product should lead to a cost correction, price review, promotion change or sourcing decision.
A price floor needs complete inputs.
Do you know every cost triggered by the order and the percentage of revenue removed by transaction fees? The threshold is not validated until all included costs are covered exactly.
Build the cost base
Confirm product cost, per-order expenses and percentage-based transaction fees.
Stress-test the floor
Simulate discounts, basket changes and supplier increases before relying on the threshold.
Monitor current exposure
Review prices and costs by product and period, then recalculate the floor when economics change.
Break-even price questions Shopify merchants should understand.
These frequently asked questions explain what break-even price means, how to calculate it and which product, order and percentage-based costs belong in the formula.
01 Price floor fundamentals What is a break-even price? +
Break-even price is the minimum selling price that covers all variable costs included in the calculation. At that exact threshold, the order produces neither a profit nor a loss.
The relevant costs may include COGS, packaging, fulfillment, merchant-funded shipping and transaction fees. A price above COGS is not automatically above break-even because the other sale-linked costs still require revenue.
For example, a product with $32 COGS, $8 of fixed per-order costs and a 3% payment fee has a break-even price of $41.24. Selling at that price covers the included costs exactly but contributes nothing toward fixed operating expenses or profit.
Explore the Break-even Calculator →02 Price floor calculation How do you calculate break-even price? +
First add product cost and every fixed amount triggered by the order. Then divide that fixed variable cost base by one minus the combined fee rate charged as a percentage of revenue:
Using $32 of product cost and $8 of fixed per-order costs, the numerator is $40. With a 3% payment fee, the store retains 97% of revenue. The calculation is therefore $40 ÷ 0.97 = $41.24.
Verify the result by calculating the fee at the final price. Three percent of $41.24 is approximately $1.24. Subtracting that fee and the $40 cost base leaves $0.00, confirming break-even.
Explore the Selling Price Calculator →03 Cost completeness Which costs should be included in break-even price? +
Include the costs that occur because the product is sold and the order is fulfilled. These normally begin with COGS and may include packaging, pick-and-pack charges, fulfillment, merchant-funded shipping and fixed transaction amounts.
Fees charged as a percentage of selling price must also be included, but they belong in the denominator. Their dollar amount changes with price, so adding an estimated fee to the numerator can produce an inaccurate threshold.
Fixed operating expenses such as salaries, software subscriptions and office rent normally sit outside a unit-level break-even price. The floor prevents the individual sale from losing money on its included variable economics; the strategic price must still leave contribution to cover wider business costs and profit.
Examine product profitability →Three break-even questions answered. Three remain.
Continue with percentage-based fees, the difference between break-even and a profitable target price, and the effect of discounts and cost changes.
04 Percentage-based fees How do percentage-based fees affect break-even price? +
Percentage-based fees increase as the selling price increases. Their exact dollar amount is therefore unknown until the price is known, so they must be incorporated into the denominator of the break-even formula.
Break-even Price = Fixed Variable Costs ÷ (1 − Percentage Fee Rate)
For example, a product with $40 of fixed variable costs and a 3% payment fee retains 97% of its selling price. The break-even calculation is $40 ÷ 0.97, producing a threshold of $41.24.
At $41.24, the 3% fee is approximately $1.24. The remaining $40 covers the complete fixed variable cost base exactly. Treating the fee as a guessed dollar amount could leave the final threshold slightly above or below true break-even.
Explore the Break-even Calculator →05 Profitability distinction Is break-even price the same as a profitable selling price? +
No. Break-even price is the lowest price that produces zero profit and zero loss under the stated cost assumptions. It is a defensive threshold, not the selling price a healthy business should normally target.
At the $41.24 break-even price in this lesson, revenue after the 3% fee covers $40 of fixed variable costs exactly. Nothing remains to absorb salaries, software, rent, general overhead or unexpected costs.
A profitable target price must sit above the floor and leave enough contribution for fixed operating costs and the desired profit. Market positioning, customer value and demand also influence how far above break-even the final price can be set.
Use break-even to define the minimum acceptable threshold. Then use a deliberate pricing strategy to choose the actual list price, rather than treating zero loss as the commercial objective.
Explore the Selling Price Calculator →06 Threshold movement How do discounts and cost increases affect break-even? +
Discounts do not normally change the break-even threshold; they reduce the selling price toward or below it. Cost increases work differently: they raise the threshold itself, even when the list price remains unchanged.
In the discount scenario, the original $41.24 floor remains unchanged but the promotional price falls to $39.20, creating a $1.98 loss. In the cost scenario, fixed variable costs rise from $40 to $43, moving break-even to $44.33.
Always test both sides of the relationship: selling prices can move downward during promotions, while the floor can move upward after supplier, fulfillment, shipping or fee changes.
Calculate discount impact →All six break-even price questions answered.
You now know how to build and verify a complete break-even price, distinguish it from a profitable target and monitor the effect of discounts and cost changes.
Continue building your Shopify pricing system.
Now that you can calculate the minimum sustainable price, continue by choosing a strategic price, protecting it during promotions and measuring what remains after every variable cost.
Pricing Strategy
Connect your break-even floor with target margins, market positioning, perceived value and competitive context to choose a defensible selling price.
Discount Strategy
Protect margin while using promotions deliberately, calculate the volume required to compensate for discounts and avoid crossing the sustainable floor.
Contribution Margin
Measure what remains after every variable cost and understand how each order contributes toward fixed operating costs and profit.
Stop pricing from COGS alone. Start protecting sustainable margin.
MarginLab analyzes product costs, discounts and actual margin signals across your Shopify data, helping you find products that require a deeper break-even review. Connect your store and turn cost changes and weak margins into prioritized profitability decisions.