How to Calculate Break-Even for a Dropshipping Store

Break-even is the number of orders you need to sell in a given period to cover all your costs and make exactly $0 profit. Below break-even, you are losing money. Above break-even, every additional order contributes pure profit at your contribution margin rate. Knowing your break-even point tells you the minimum traffic you need to drive, the minimum conversion rate you need to hit, and the minimum ad performance you need to survive.

The Formula

Contribution Per Unit = Selling Price − Variable Cost Per Unit

Break-Even Units = Fixed Costs ÷ Contribution Per Unit

Break-Even Revenue = Break-Even Units × Selling Price

Contribution Margin = Contribution Per Unit ÷ Selling Price

Worked Example

Your monthly fixed costs are $350 (Shopify Basic $39, a couple of apps at $20 each, your domain, and you treat your own time as $200/month). Your product sells for $39.99. Your variable cost — product, shipping, processing fee, ad cost per sale — is $22.00.

• Contribution per unit = 39.99 − 22.00 = $17.99
• Break-even units = 350 ÷ 17.99 = 20 orders/month
• Break-even revenue = 20 × 39.99 = $799.80
• Contribution margin = 17.99 ÷ 39.99 = 45%

Twenty orders a month is one order every 1.5 days. If your conversion rate is 2%, you need 1,000 sessions/month to break even — about 33 sessions/day. That is achievable even with modest organic traffic and a small ad budget.

What Counts as a "Fixed Cost" in Dropshipping?

Fixed costs are expenses that do not change whether you sell 1 order or 1,000. In dropshipping these typically include:

• Ecommerce platform subscription (Shopify, WooCommerce hosting, BigCommerce)
• Apps and plugins (review apps, email tools, page builders, fraud protection)
• Domain registration and SSL
• Theme purchase (one-time, but amortize it)
• Email / SMS platform base fees (Klaviyo, Omnisend, Postscript)
• Virtual assistant or freelancer retainers
• Business software (Canva Pro, ChatGPT, CapCut Pro)

Do not include ad spend here — ad spend is a variable cost, because it scales with order volume.

Using Break-Even to Plan Ad Spend

Once you know your break-even units and your contribution margin, you can back-calculate your maximum allowable cost per acquisition (CAC):

Max CAC = Contribution Per Unit − Desired Profit Per Unit

If your contribution is $17.99 and you want to keep $5 profit per order, your max CAC is $12.99. If your ads cost more than $12.99 per acquisition, you will not hit your profit target — even if you are technically above break-even.

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