Think LauncherGuides · 23 October 2026
How to work out your break-even price
Your break-even price is the lowest price at which a sale makes no profit and no loss. Below it you lose money on every order. Most owners guess it by adding up the product cost, but shipping, payment fees and returns all move the number. Here is the formula and a worked example.
The product
| Item | Amount |
|---|---|
| Your cost per item | $18.00 |
| Shipping you pay per order | $5.00 |
| Payment fee | 2.9% + $0.30 |
| Returns and refunds | 5% of revenue |
All prices here are before sales tax or GST. Work with the amount you actually keep.
The three steps
Step 1: add your fixed costs. These are costs that stay the same whatever the price: product cost + shipping + the fixed part of the payment fee.
$18.00 + $5.00 + $0.30 = $23.30
Step 2: add your percentage costs. These grow with the price: the payment percentage plus your returns allowance.
2.9% + 5% = 7.9%, which is 0.079 as a decimal.
Step 3: divide.
Break-even price = fixed costs ÷ (1 − percentage costs)
$23.30 ÷ (1 − 0.079) = $23.30 ÷ 0.921 = $25.30 (rounded up to the next cent)
Check it
| At a price of $25.30 | Amount |
|---|---|
| Product cost | $18.00 |
| Shipping | $5.00 |
| Payment fee | $1.03 |
| Returns allowance | $1.27 |
| Total costs | $25.30 |
| Profit | about $0.00 |
Sell at $25.30 and you break even. One cent lower and every order loses money. That is $2.30 more than the $23 a quick sum of cost plus shipping would suggest.
The price for the margin you want
To aim for a profit, take the margin you want away from the bottom of the division as well:
Price = fixed costs ÷ (1 − percentage costs − margin)
| Margin you want | Price |
|---|---|
| 0% (break-even) | $25.30 |
| 20% | $32.32 |
| 30% | $37.52 |
| 40% | $44.72 |
At $37.52, for example, payment fee and returns come to $3.26, the other costs are $23.00, and the $11.26 left over is 30% of the price.
What moves your break-even price
- A higher product cost. Every extra $1 on your cost raises the break-even price by about $1.09, because the extra cost also has to cover the percentage costs. A $2 price rise from your supplier adds about $2.17.
- Other costs per order. If you also pay about $4 in advertising for each order, treat it as a fixed cost: $27.30 ÷ 0.921 = about $29.64.
- Freight, duty and fees on imports. Use the true landed cost as your product cost, not the invoice price. The landed cost guide shows how.
- A higher return rate. Every extra percentage point of returns raises the percentage costs and the break-even price.
How to use it
- Work out the break-even price for your main products.
- Compare it with your selling price. If they are close, that product has little room for discounts.
- Use it as your floor: no sale price, discount code or bundle should go below it.
- Recalculate when your supplier cost, shipping, payment fees or return rate changes.
To see how far a discount can go before you reach this floor, read how discounts turn a profitable product into a loss. To see how many extra sales a discount needs, read how much more you need to sell to make a discount worth it.