How a P&L behaves
Break-even point
The moment the month has covered its fixed costs.
Formula
Cumulative CM3 = fixed costs for the period
The break-even point is the moment cumulative contribution margin equals the period's fixed costs. Before it, every order is working to cover the base; after it, contribution is profit. In a store it is best read as a day of the month rather than a revenue figure.
Reading it as a date rather than a number is what makes it useful: 'we broke even on the seventh' is a sentence anyone in the business can act on, and how the date moves month over month is a better health signal than most ratios.
It moves when either side moves, so an added subscription or a new hire pushes the date out even if nothing about sales changed. An ecommerce break-even calculator works the date out from your own fixed costs and contribution margin.
The margin to feed it is CM3 per order, the one after advertising. Using gross margin makes break-even look days earlier than it is, because it quietly assumes the parcels shipped themselves and the ads were free.
Related terms