What is the difference between contribution margin and gross margin?

Gross margin is usually stated at the company level as revenue minus cost of goods sold, and it often excludes selling costs such as payment fees and shipping. Contribution margin is per unit and includes every cost that a single additional sale causes, which makes it the right figure for a break-even calculation. Contribution margin is normally the smaller and more conservative of the two.

Should advertising spend be a fixed cost or a variable cost?

It depends how you actually run it, and the only real mistake is counting it twice. A committed monthly budget that does not respond to sales behaves as a fixed cost and belongs above the line. Spend that scales directly with each sale, such as an affiliate commission or a strictly capped cost per acquisition, behaves as a variable cost and reduces contribution margin instead.

What break-even ROAS do I need?

One divided by your contribution margin expressed as a fraction. At a 25% contribution margin you need a return of 4.00 for the advertising to pay for itself; at 50% you need 2.00. Compare that against the figure your ad platform reports, remembering that the platform reports attributed revenue rather than incremental revenue, so the real threshold sits somewhat higher than the arithmetic suggests.

Does break-even tell me when I will be profitable?

It tells you the volume required, not the date. Turning volume into a timeline needs an assumption about the rate of sale, which is precisely the thing a new product does not know. The useful way to read the number is as a feasibility test: if the required volume is far beyond anything the channel has ever delivered, the pricing or the cost base needs to change before the marketing plan does.

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Break-even calculator

Find break-even units and revenue from fixed costs, price and variable cost, plus the contribution margin and the ROAS an ad campaign has to clear first.

Solve for

Your numbers

Fixed costs

Costs that do not move with volume over the period: rent, salaries, software, retainers. Enter it in your own currency.

Price per unit

What the customer actually pays after discounts, before sales tax. Enter it in your own currency.

Variable cost per unit

Everything a single extra sale costs you: goods, shipping, payment fees, support time. Enter it in your own currency.

Units to break even

387

You need about 387 units in the period to cover the fixed costs. Sale number one beyond that is the first profitable one.

The sum this ran

Units to break even = Fixed costs ÷ Contribution margin per unit

Contribution margin per unit = Price per unit - Variable cost per unit = $31.00

Everything here runs in your browser. Nothing you type is uploaded, which matters when the inputs are spend, revenue and margin.

Contribution margin is the entire calculation

Break-even looks like it is about fixed costs, and it is really about the money each sale leaves behind once the costs caused by that sale are paid. Everything else on this page is that one figure divided into something.

Contribution margin per unit is price minus variable cost. If it is zero or negative, there is no break-even volume: every additional sale makes the loss larger.
Fixed costs set how many of those margins you need. Doubling fixed costs doubles the volume required, with no change to the economics of a single sale.
Contribution margin as a percentage of price is what decides your sensitivity to discounting. At a 60% margin a 10% discount costs a sixth of your margin; at a 20% margin it costs half.
Break-even is a volume, not a date. Turning it into a date needs a view on how fast you can actually sell, which this calculation deliberately does not assume.

The exact sums this page runs

Four readings of one margin. The last is the one advertisers need most and calculate least: the return on ad spend a campaign must exceed before it contributes anything at all.

Contribution margin per unit = Price per unit - Variable cost per unit. What one sale leaves behind to pay the fixed costs. If this is zero or negative, no volume saves you.
Units to break even = Fixed costs ÷ Contribution margin per unit. How many sales cover the fixed costs exactly. Round up: you cannot sell most of a unit.
Revenue to break even = (Fixed costs ÷ Contribution margin per unit) × Price per unit. The same answer in money, which is usually the version a board asks for.
Contribution margin = (Contribution margin per unit ÷ Price per unit) × 100. Margin as a share of price. It is the single number that decides how sensitive you are to a discount.
Break-even ROAS = Price per unit ÷ Contribution margin per unit. The return on ad spend a campaign has to beat before it adds anything. Below it, growth loses money faster.

Sorting fixed from variable

The split between fixed and variable is the part people get wrong, and misclassifying one line quietly moves the break-even volume by a large amount. The test is simple: does this cost change when you sell one more unit.

Variable: cost of goods, packaging, shipping, payment processing fees, per-unit fulfilment, commission, and the support time a single order genuinely creates.
Fixed: rent, salaried staff, software subscriptions, insurance, and retainers that do not move with volume over the period you are modelling.
Mixed costs need splitting. A warehouse with a base rent and a per-pallet charge contributes to both sides, and lumping it into either one distorts the answer.
Advertising is genuinely ambiguous. Treat it as fixed when it is a committed monthly budget, and as variable when it is spent to acquire each sale, but never as both.
Everything must sit in the same period. Annual fixed costs against monthly sales volume produces an answer twelve times too large.

Break-even ROAS, the version advertisers actually need

Ad platforms report return on ad spend against revenue, and revenue is not money you keep. The threshold that separates profitable advertising from expensive growth is set by your unit economics, and it is usually higher than people assume.

Break-even ROAS is price divided by contribution margin, which is the same as one divided by the margin percentage. A 30% contribution margin means advertising must return roughly 3.33 times its spend simply to avoid losing money.
That threshold ignores fixed costs entirely. Clearing it means the advertising pays for itself, not that the business is profitable.
Discounting raises the threshold sharply, because it cuts the margin rather than the price. A 20% off promotion on a 40% margin product lifts break-even ROAS from 2.50 to 5.00.
If you acquire customers who buy repeatedly, you can justify running below break-even on the first order, but only against a lifetime value computed on margin and only if you can fund the gap in the meantime.

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Frequently asked questions

How this tool works, what it cannot do, and what happens to what you put into it.

What is the difference between contribution margin and gross margin?
Gross margin is usually stated at the company level as revenue minus cost of goods sold, and it often excludes selling costs such as payment fees and shipping. Contribution margin is per unit and includes every cost that a single additional sale causes, which makes it the right figure for a break-even calculation. Contribution margin is normally the smaller and more conservative of the two.
Should advertising spend be a fixed cost or a variable cost?
It depends how you actually run it, and the only real mistake is counting it twice. A committed monthly budget that does not respond to sales behaves as a fixed cost and belongs above the line. Spend that scales directly with each sale, such as an affiliate commission or a strictly capped cost per acquisition, behaves as a variable cost and reduces contribution margin instead.
What break-even ROAS do I need?
One divided by your contribution margin expressed as a fraction. At a 25% contribution margin you need a return of 4.00 for the advertising to pay for itself; at 50% you need 2.00. Compare that against the figure your ad platform reports, remembering that the platform reports attributed revenue rather than incremental revenue, so the real threshold sits somewhat higher than the arithmetic suggests.
Does break-even tell me when I will be profitable?
It tells you the volume required, not the date. Turning volume into a timeline needs an assumption about the rate of sale, which is precisely the thing a new product does not know. The useful way to read the number is as a feasibility test: if the required volume is far beyond anything the channel has ever delivered, the pricing or the cost base needs to change before the marketing plan does.
Is my data private?
Yes. This tool does its work in your browser, so whatever you type, paste or upload stays on your device. Nothing is sent to our servers, which is also why it keeps working if you go offline after the page has loaded.
Is this really free?
Yes. Every tool here is free with no account, no credit card and no usage cap. They exist so that the people who need our scheduling product find us, which only works if the tools are genuinely useful on their own.
Do I need an account?
No. Open the page and use it. An account is only for OctoSpark itself, where you plan, schedule and publish a whole calendar rather than fixing one post at a time.
Can I use the output commercially?
Yes. Anything you produce here is yours, including for client and commercial work. We claim no rights over it and we do not watermark it.