Small Shop Break-even Example

The shop

Maya runs a small gift shop. She sells a mix of cards, candles, and small decor items. The average product sells for $20 and costs her $9 wholesale.

Step 1 — Fixed costs per month

• Rent: $1,800
• Utilities: $250
• Part-time assistant: $1,400
• Insurance and software: $200
• Maya's own salary target: $2,000

Total fixed costs = $5,650

Step 2 — Variable cost per sale

Average wholesale cost per item: $9. She also pays roughly $0.60 per transaction in card processing fees.

Variable cost per item ≈ $9.60

Step 3 — Contribution margin per item

Step 4 — Break-even quantity

That's roughly 18 sales per day if the shop is open every day, or about 21 per day if she closes on Sundays.

Practical interpretation

• Below 544 items/month → Maya is losing money (or not paying herself fully).
• At 700 items/month → profit ≈ (700 − 544) × $10.40 = $1,622 above her target salary.
• If she raised the average price by $2 (to $22), break-even drops to about 456 items/month — a meaningful difference.

Lesson

Break-even turns vague pressure into a clear, daily target. It also shows why small price increases can move the needle more than big effort to sell more units.

See Break-even Point Explained for the underlying formula and rules.