# Break-even point for a retail store, with worked math

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# Break-even point for a retail store, with worked math

A store's break-even point is its fixed costs divided by its contribution margin, so a supply store with $45,000 of monthly fixed costs and a 40% margin needs $112,500 of sales a month, about 111 customers a day, and here is how to run that math for your own store, a new hire, or a delivery truck.

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[Titus Capilnean](https://www.linkedin.com/in/tituscapilnean/), Head of Marketing
October 27, 2026
Last updated October 27, 2026

Your break-even point is the level of sales where total revenue equals total cost, and for a retail store you find it by dividing your fixed costs by your contribution margin. A supply store with $45,000 of monthly fixed costs and a 40% contribution margin breaks even at $112,500 of sales a month, and everything above that line is profit.

## The break-even formula

The U.S. Small Business Administration [defines the break-even point](https://www.sba.gov/business-guide/plan-your-business/calculate-your-startup-costs) as "the point at which total cost and total revenue are equal," and that one sentence is the whole idea. Below the line, every sale is digging you out of a hole, and above it, every sale adds to profit. The math comes in two flavors, and both are useful at the counter:

**Break-even point in units = fixed costs ÷ (sales price per unit − variable cost per unit)**

**Break-even point in sales dollars = fixed costs ÷ contribution margin**

The unit version answers "how many of this thing do I need to sell?" and the sales-dollar version answers "how much do I need to ring this month?", which is the more practical question for a store selling thousands of SKUs. If you would rather plug numbers into a tool than a notebook, the SBA has a free [break-even point calculator](https://www.sba.gov/counseling/plan-your-business/break-even-point-calculator/) that runs the same math.

## Contribution margin, the way a store should think about it

Contribution margin is what is left of each sales dollar after the costs that rise with that sale. The SBA's formula is (sale price per unit − variable cost per unit) ÷ sale price per unit. For a store that resells goods, the biggest variable cost by far is the cost of the goods themselves, so your contribution margin starts as your gross margin and then shrinks a little for everything else that climbs with each sale: the bags, the receipt paper, the card processing on that transaction.

Don't borrow anyone else's percentages for those smaller costs, card processing included. Pull your own numbers from your statements, because a point or two moves your break-even more than you would guess, as the example below shows. If your gross margin math needs a refresher first, our guides to the [gross margin formula](/resources/guides/gross-margin-formula/index.md) and the [cost of goods sold formula](/resources/guides/cost-of-goods-sold-formula/index.md) walk through it with store numbers.

## Fixed costs vs variable costs at a supply store

The whole calculation rests on sorting your expenses into two buckets, and most of the sorting is easy once you ask one question: does this cost change when I sell one more item?

| Cost | Fixed or variable | Why |
| --- | --- | --- |
| Rent | Fixed | Same check every month, busy or slow |
| Payroll | Fixed (mostly) | Your core crew gets paid whether Tuesday is quiet or at its busiest |
| Utilities | Fixed | The lights and the heat don't care about ticket count |
| Insurance | Fixed | A premium is a premium |
| Software subscriptions | Fixed | Flat monthly fee |
| Truck lease and insurance | Fixed | Costs the same parked or delivering |
| Cost of goods sold | Variable | Every item out the door had a cost on the purchase order |
| Bags, receipt paper, stretch wrap | Variable | More transactions, more consumables |
| Card processing on a sale | Variable | Scales with the ticket |
| Commissions or spiffs | Variable | Paid per sale, not per month |

Two judgment calls are worth noting. Seasonal and overtime hours behave more like variable costs, so if your spring crew is a big number, treat it separately rather than burying it in payroll. And shrink is not a line item you plan for, but it cuts into your margin, which means it raises your break-even, so the [cycle counts](/resources/guides/cycle-counting-for-retail-stores/index.md) that keep it in check are protecting this math too.

## A worked example: one store's monthly break-even

Here is an illustrative store with small, realistic numbers:

| Monthly cost | Amount |
| --- | --- |
| Rent | $8,000 |
| Payroll | $27,500 |
| Utilities, insurance, software, and the rest | $9,500 |
| **Total fixed costs** | **$45,000** |
| Contribution margin | 40% |

Break-even = $45,000 ÷ 0.40 = **$112,500 in sales a month**, which is the number the store has to clear before it earns its first dollar of profit.

Now make it useful at the counter. Open 26 days a month, break-even works out to about **$4,327 a day**, and at $39 of sales per customer, the figure the NHPA's 2025 Cost of Doing Business Study reported for hardware stores (an all-time high, for fiscal 2024, per [Hardware Retailing](https://hardwareretailing.com/staying-on-par-highlights-from-the-2025-cost-of-doing-business-study/)), that is about **111 customers a day**.

Suddenly break-even is not an accounting abstraction but a headcount, and on a slow Wednesday you can glance at the door and know whether you are ahead of the number or behind it. Contractor tickets tend to run bigger than walk-in tickets, so run the same division with your own average sale per customer and see what your daily headcount looks like.

## Break-even for a decision: the new hire and the delivery truck

Break-even analysis earns its keep when you are weighing a specific expense, because every new fixed cost comes with a sales target attached. The formula is the same: new fixed cost ÷ contribution margin = added sales needed to pay for it.

**The new hire.** Say a full-time hire costs $3,600 a month fully loaded (wages, taxes, benefits). At a 40% margin, that hire needs to support $9,000 of added sales a month to pay for themselves ($3,600 ÷ 0.40). That doesn't mean they personally ring $9,000, but their presence has to enable it through shorter lines on Saturday, a staffed will-call counter, or receiving done so the shelves stay full. If you can't point to where the $9,000 comes from, the hire is a hope, not a plan.

**The delivery truck.** A truck at $1,800 a month, lease plus insurance, delivering lumber or feed that you sell at a 30% margin, needs $6,000 of added delivered sales a month to break even ($1,800 ÷ 0.30). Notice what the lower margin did: the truck costs half what the hire does, but because the delivered goods carry a thinner margin, it needs two-thirds as much added sales to justify itself. The truck doesn't pay for itself in good intentions, only in board feet and feed bags that would not have gone out the door otherwise.

## How margin changes move your break-even

Contribution margin is the most sensitive number in the whole equation, and small slips cost real money. Take the example store and shave the margin from 40% to 38%, the kind of two-point drift that happens when vendor costs creep up and shelf prices don't follow, or when discounting gets generous.

| Contribution margin | Monthly break-even |
| --- | --- |
| 40% | $112,500 |
| 38% | $118,421 |

Two margin points, and the store needs **$5,921 more in sales every month to stand still**, which is roughly 152 more customer visits a month at a $39 average sale. This is also why the difference between margin and markup matters at the shelf: a store that prices with a 40% markup when it meant a 40% margin is running far below the margin its break-even assumes. Our guide to [margin vs markup pricing](/resources/guides/margin-vs-markup-pricing-hardware-store/index.md) covers the conversion math if that is a conversation you are still having with your price gun.

## Margin of safety: how much room you have

Once you know your break-even, the next question is how far above it you are operating, which is the margin of safety:

**Margin of safety = (actual sales − break-even sales) ÷ actual sales**

If the example store does $130,000 in a month against its $112,500 break-even, the margin of safety is ($130,000 − $112,500) ÷ $130,000 = **13.5%**, meaning sales could fall 13.5% before the store starts losing money. A healthy margin of safety turns a rainy month or a delayed contractor job into an annoyance rather than a crisis. A thin one means you are one soft month from writing a check out of savings, and it is a signal to trim fixed costs, defend margin, or build the average ticket before the slow season arrives.

## Seasonality: check break-even by month

An annual break-even is a comfortable fiction for a seasonal store. A garden center can earn most of its year in a few spring weeks, so the annual average hides the Januarys and Februarys that lose money, while feed stores run on their own calendar, paint follows the weather for exterior work, and every lumber yard knows the difference between framing season and the dead of winter.

So run the break-even math monthly, not once a year. Fixed costs shift by month anyway as seasonal payroll arrives, the heat bill climbs, and the spring inventory build ties up cash before it returns any. A month-by-month break-even tells you which months are profit months, which are survive-them months, and how big your spring needs to be to carry your winter. That monthly view also feeds your buying, because once you know what March has to do, your [open-to-buy plan](/resources/guides/open-to-buy-plan-for-supply-stores/index.md) stops being a guess, and when the rush does hit, the constraint shifts to the checkout line, which we cover in [getting a greenhouse through the spring rush](/resources/guides/greenhouse-retail-pos-spring-rush-checkout/index.md).

## Where Rundoo fits

Break-even math is only as good as the fixed costs and margins you feed it. Rundoo keeps its own general ledger with a profit and loss and balance sheet under Admin > Reporting, so the monthly expense totals and the margin figure sit in the same system that checks out your customers. Dooey, Rundoo's AI assistant, can run a routine that flags margin drops after cost changes, which matters because, as the example showed, a two-point drift adds thousands to the sales you need each month. One boundary to know: Rundoo has no payroll or time clock, so stores keep QuickBooks for accounting and payroll, and the payroll line in your fixed costs will come from there.

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## Frequently asked questions

How do you calculate the break-even point?

Divide your fixed costs by your contribution margin to get break-even in sales dollars, or divide fixed costs by the per-unit profit (sale price minus variable cost per unit) to get break-even in units. For a store, fixed costs are rent, payroll, insurance, and the like, and variable costs are mostly the cost of the goods plus small per-sale costs. A store with $45,000 of monthly fixed costs and a 40% contribution margin breaks even at $112,500 of sales a month.

What is the break-even formula in sales dollars?

Break-even sales = fixed costs ÷ contribution margin, where contribution margin is the share of each sales dollar left after the costs that rise with that sale. For a store that resells goods, that is your gross margin minus any other per-sale costs such as bags or card processing. With $45,000 of fixed costs, a 40% contribution margin needs $112,500 of monthly sales, and a 38% margin needs $118,421.

What is a contribution margin?

The U.S. Small Business Administration defines contribution margin as (sale price per unit − variable cost per unit) ÷ sale price per unit. It is the share of each sales dollar left to cover fixed costs and then become profit. For a retail store, start with your gross margin and trim it for per-sale costs, using the figures from your own statements rather than anyone else's averages.

How many customers does my store need a day to break even?

Divide your monthly break-even sales by the days you are open, then divide by your average sale per customer. A store that needs $112,500 a month and is open 26 days needs about $4,327 a day, and at $39 per customer, the hardware store figure from the NHPA 2025 Cost of Doing Business Study, that is about 111 customers a day. Use your own average ticket, because a contractor-heavy store and a walk-in store have very different counts.

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