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Guide

How to calculate ROI and the break-even point

How do I calculate ROI and the break-even point?

5 min read

Short answer

ROI is what you got back minus what you spent, divided by what you spent, times 100. The break-even point is your fixed costs divided by what each unit earns after its own cost. The free ROI and break-even calculator on this site does both from your own numbers.

ROI

ROI = (gain minus cost) ÷ cost × 100. Spend ₹1,00,000 and get back ₹1,50,000 and the profit is ₹50,000 and the ROI is 50%. A negative result means you got back less than you spent.

ROI is not ROAS

ROAS is sales divided by ad spend, and it ignores what the products cost you. A ROAS of 3 sounds good, but with a 25% margin, ₹3 of sales earns you only 75 paise of profit while the ads cost ₹1, so you lose 25 paise on every rupee spent. For ads, work with profit, not sales.

Try it now: ROI and Break-even Calculator → · Shopify Profit Margin and Fees Calculator →

The break-even point

Break-even units = fixed costs ÷ (price minus cost per unit). With a price of ₹500, a cost of ₹300 and fixed costs of ₹50,000, each unit earns ₹200, so you need 250 units, which is ₹1,25,000 of sales, before you stop losing money.

Fixed and variable costs

Fixed costs stay the same however much you sell: rent, salaries, tools, a retainer. Variable costs grow with each sale: the product, shipping, packaging and payment fees. Getting this split right matters, because putting a variable cost in the fixed pile makes break-even look easier than it is.

Using it to decide

Break-even tells you the minimum. Compare it with what you can realistically sell. If the number of units needed is far above what you sell today, raise the price, cut the cost per unit, or cut the fixed costs before you spend more on growth.

Run it again when your costs change. A new tool, a price rise from a supplier or a larger discount all move the answer.

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