How to Calculate Your Breakeven Number | #627

Revenue is still the number most ecommerce founders lead with. It's the easiest to celebrate, the easiest to screenshot, and the one that gets the most airtime in strategy conversations. But it's also the number that tells you the least about whether the business is actually working.

Most operators are chasing a revenue target that has no maths behind it. Nobody has calculated the one number that gives a revenue target its job. Gross profit might be off. Contribution margin might be close to zero. Overheads might be quietly eating through whatever's left. And the founder usually finds out too late, when cashflow tightens or a BAS payment lands.

The brands getting this right do three things differently.

In this playbook, based on a conversation with Matt Byrne, founder of Day One Advisory, we cover three things ecommerce operators need to know about calculating a breakeven number that actually works:

• Start with the sequence, not the target. Gross profit and contribution margin come before breakeven, and if either is off the breakeven will be too
• The formula takes ten minutes, but it only works if you run it twice. Once with the numbers as they are, then again with subscriptions and full people costs included
• Use breakeven before you make a decision, not after. Discount campaigns, ad spend targets and stock orders should all be stress tested against it first

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