The $15K Product Launch That Never Broke Even
The enthusiastic launch:
You found a great product idea on Alibaba:
- Supplier MOQ: 500 units
- Per-unit cost: $12
- Tooling/setup fee: $2,000
- You plan to sell for: $40
Your quick math:
- Margin per unit: $40 - $12 = $28
- Profit on 500 units: $28 × 500 = $14,000
- Minus tooling: $14,000 - $2,000 = $12,000 profit
- "This looks great!"
What you forgot:
- Shipping from China: $1,500
- Photos/content: $800
- Sample units (3 rounds): $400
- Packaging design: $500
- First month ads: $3,000
- Shopify fees (8%): $40 × 0.08 × 500 = $1,600
- Payment processing (3%): $40 × 0.03 × 500 = $600
Actual fixed costs: $2,000 + $1,500 + $800 + $400 + $500 + $3,000 = $8,200
Variable costs per unit: $12 + $3.20 (fees) = $15.20
Contribution margin: $40 - $15.20 = $24.80
Break-even units: $8,200 / $24.80 = 331 units
Reality:
- You only sold 180 units in first 3 months
- You're $3,750 in the hole
- 320 units sitting in your garage
- You need to sell another 151 units just to break even
If you'd done break-even analysis first, you would have known:
- Need 331 units to break even
- 500 MOQ leaves only 169 units margin for error
- At realistic 5% conversion, you need 6,620 visitors
- At $1 CPC, that's $6,620 in ads (already over budget)
This guide teaches you to calculate ALL costs upfront so launches are profitable, not surprises.
Break-Even Formula: The Two Types
Type 1: Simple Break-Even (Units)
Formula:
```
Break-Even Units = Fixed Costs / Contribution Margin per Unit
Where:
Contribution Margin = Selling Price - Variable Cost per Unit
```
Example:
- Fixed costs: $5,000
- Selling price: $50
- Variable cost: $20
- Contribution margin: $50 - $20 = $30
- Break-even: $5,000 / $30 = 167 units
You must sell 167 units to cover all costs.
Type 2: Break-Even Revenue (Dollars)
Formula:
```
Break-Even Revenue = Fixed Costs / Contribution Margin Ratio
Where:
Contribution Margin Ratio = (Selling Price - Variable Cost) / Selling Price
```
Same example:
- Contribution margin ratio: ($50 - $20) / $50 = 60%
- Break-even revenue: $5,000 / 0.60 = $8,333
You need $8,333 in sales to break even (167 units × $50 = $8,333 ✓)
Excel Formulas:
Break-even units:
```excel
=Fixed_Costs / (Selling_Price - Variable_Cost_Per_Unit)
```
Break-even revenue:
```excel
=Fixed_Costs / ((Selling_Price - Variable_Cost_Per_Unit) / Selling_Price)
```
Build a Product Launch Break-Even Model
-
3
List ALL Fixed Costs
Fixed costs = one-time or pre-launch costs regardless of units sold. Include: tooling/molds, samples (all rounds), photography, design, packaging design, trademark/legal, first marketing budget, shipping (container from China). Don't underestimate!
-
3
Set Selling Price
Research competitor prices. Calculate minimum viable price: 3× COGS rule (if COGS $15, sell $45+). Ensure margin covers variable costs + platform fees + profit.
-
3
Calculate Contribution Margin
Formula: =Selling_Price - Variable_Cost_Per_Unit. This is profit per unit AFTER variable costs, BEFORE fixed costs recovered. Positive contribution margin required or you lose money on every sale.
-
3
Calculate Break-Even Units
Formula: =SUM(Fixed_Costs) / Contribution_Margin. Result: number of units you must sell to recover all fixed costs. Compare to MOQ: if break-even > MOQ, dangerous.
-
3
Build Sensitivity Analysis Table
Data Table showing break-even at different price points and cost scenarios. Rows: Price ($40, $45, $50). Columns: COGS ($12, $15, $18). Shows how sensitive launch is to pricing/cost changes.
-
3
Add Marketing Viability Check
Calculate visitors needed: =Break_Even_Units / Conversion_Rate. Then ad spend: =Visitors × CPC. If required ad spend > your budget, launch isn't viable. Reality check before investing.
-
3
Create Profit Projection Chart
X-axis: Units sold (0 to MOQ). Y-axis: Profit/Loss. Plot line: =(Units × Contribution_Margin) - Fixed_Costs. Shows break-even point visually, profit potential at different volumes.
The Complete Cost Checklist: What People Forget
Fixed Costs (One-Time Launch Costs)
Product Development:
- [ ] Samples (3-5 rounds typical): $300-$1,000
- [ ] Tooling/molds/setup fees: $1,000-$10,000+
- [ ] Product design/engineering: $500-$5,000
- [ ] Packaging design: $300-$1,500
- [ ] Compliance testing (if required): $500-$5,000
- [ ] Trademark/legal (if applicable): $500-$2,000
Freight & Logistics:
- [ ] Shipping from supplier (container/air): $500-$5,000
- [ ] Customs/duties/brokerage: 5-10% of product value
- [ ] Freight forwarding fees: $200-$500
- [ ] Warehousing first month (if not at home): $100-$500
Marketing Launch:
- [ ] Photography (product + lifestyle): $500-$2,000
- [ ] Video content: $500-$3,000
- [ ] Product page copywriting: $200-$800
- [ ] Initial ad budget (first month): $1,000-$5,000+
- [ ] Influencer samples/seeding: $300-$1,000
- [ ] Email list building tools: $50-$200
Platform Setup:
- [ ] Shopify/WooCommerce setup (if new store): $300-$1,000
- [ ] Apps/subscriptions (first month): $100-$300
Variable Costs (Per Unit Sold)
Product:
- [ ] COGS (cost from supplier)
- [ ] Packaging materials per unit
- [ ] Inserts/branded packaging
- [ ] Product labeling/stickers
Fulfillment:
- [ ] Pick/pack labor (if self-fulfilling): $2-$5/unit
- [ ] Shipping to customer: $5-$15/unit (varies by size/weight)
- [ ] Shipping materials (box, tape, etc): $0.50-$2/unit
Platform Fees:
- [ ] Shopify: 2-3% payment processing
- [ ] Amazon: 15% referral fee + fulfillment
- [ ] eBay: 10-15% final value fee
- [ ] Payment processor (Stripe/PayPal): 2.9% + $0.30
Returns/Damaged (Allowance):
- [ ] 3-5% return rate × (product cost + shipping both ways)
The Forgotten Costs:
Most people forget:
1. Return shipping (you pay both ways typically)
2. Customs/duties (5-10% of product value)
3. Multiple sample rounds ($300-$800 total)
4. Photos AND video (not just photos)
5. First month marketing (can't launch without ads)
Sensitivity Analysis: Test Your Assumptions
Why Sensitivity Analysis Matters:
You estimated:
- COGS: $15
- Selling price: $50
- Conversion rate: 3%
But what if:
- COGS is actually $18 (supplier raised price)
- You can only sell for $45 (competitors undercut)
- Conversion is 2% (harder to sell than expected)
Sensitivity analysis tests "what if" scenarios.
Build a Data Table in Excel:
Scenario 1: Price vs Break-Even
| Selling Price | Break-Even Units | Break-Even Revenue |
|---------------|------------------|---------------------|
| $40 | 250 units | $10,000 |
| $45 | 208 units | $9,360 |
| $50 | 178 units | $8,900 |
| $55 | 156 units | $8,580 |
| $60 | 139 units | $8,340 |
Insight: Every $5 price drop requires 40+ more unit sales to break even.
Scenario 2: COGS vs Break-Even
| COGS | Contribution Margin | Break-Even Units |
|------|---------------------|------------------|
| $12 | $38 | 132 units |
| $15 | $35 | 143 units |
| $18 | $32 | 156 units |
| $21 | $29 | 172 units |
| $24 | $26 | 192 units |
Insight: Every $3 COGS increase requires 13+ more sales to break even.
Scenario 3: Fixed Costs vs Break-Even
| Fixed Costs | Break-Even Units | % of 500 MOQ |
|-------------|------------------|--------------|
| $3,000 | 86 units | 17% |
| $5,000 | 143 units | 29% |
| $7,000 | 200 units | 40% |
| $10,000 | 286 units | 57% |
| $15,000 | 429 units | 86% |
Insight: At $15K fixed costs, you must sell 86% of MOQ just to break even. No room for error.
Excel Data Table Setup:
1. Create base break-even formula: `=Fixed_Costs / (Price - COGS)`
2. Select range for table
3. Data → What-If Analysis → Data Table
4. Row input cell: Price
5. Column input cell: COGS
6. Excel fills table with break-even at each combination
From Break-Even to Profit Target
Break-Even Isn't the Goal
Breaking even means: recovered costs, made $0 profit.
You need profit for:
- Your time (opportunity cost)
- Next product development
- Marketing to sustain sales
- Business growth
Profit Target Formula:
```
Units Needed = (Fixed Costs + Desired Profit) / Contribution Margin
```
Example:
- Fixed costs: $5,000
- Desired profit: $10,000
- Contribution margin: $30/unit
- Units needed: ($5,000 + $10,000) / $30 = 500 units
To make $10K profit, you need 500 sales (not 167 break-even).
ROI Calculation:
```
ROI = (Net Profit / Total Investment) × 100
```
Example:
- Total investment: $5,000 fixed + ($20 variable × 500 units) = $15,000
- Revenue: $50 × 500 = $25,000
- Net profit: $25,000 - $15,000 = $10,000
- ROI: ($10,000 / $15,000) × 100 = 67%
Payback Period:
```
Payback Period (months) = Total Investment / (Monthly Revenue - Monthly Variable Costs)
```
Example:
- Total investment: $15,000
- Sell 50 units/month at $50 = $2,500 revenue
- Variable costs: 50 × $20 = $1,000
- Monthly contribution: $2,500 - $1,000 = $1,500
- Payback: $15,000 / $1,500 = 10 months
You recover investment in 10 months at this rate.
The Viability Checklist: Should You Launch?
Green Lights (Launch Looks Good):
- [ ] Break-even < 40% of MOQ (room for error)
- [ ] Contribution margin > 50% (healthy margins)
- [ ] Payback period < 6 months (fast recovery)
- [ ] ROI > 50% in first year (worth the effort)
- [ ] Marketing spend to break-even < 30% of fixed costs
- [ ] Supplier has <30 day lead time (inventory flexibility)
- [ ] Tested pricing with surveys/feedback (validated)
Yellow Lights (Proceed with Caution):
- [ ] Break-even = 40-70% of MOQ (tight margin for error)
- [ ] Contribution margin = 30-50% (acceptable but lean)
- [ ] Payback period = 6-12 months (slow but viable)
- [ ] ROI = 25-50% (modest returns)
- [ ] Marketing spend = 30-50% of fixed costs
- [ ] Supplier lead time = 30-60 days
Red Lights (Don't Launch):
- [ ] Break-even > 70% of MOQ (almost no profit potential)
- [ ] Contribution margin < 30% (can't support business)
- [ ] Payback period > 12 months (too slow)
- [ ] ROI < 25% (better opportunities exist)
- [ ] Marketing spend > 50% of fixed costs (unprofitable CAC)
- [ ] Negative contribution margin (lose $ on every sale)
Decision Matrix:
Example A:
- MOQ: 500 units
- Break-even: 150 units (30% of MOQ) ✓
- Contribution margin: 55% ✓
- ROI: 80% ✓
- Decision: GREEN - Launch
Example B:
- MOQ: 500 units
- Break-even: 420 units (84% of MOQ) ✗
- Contribution margin: 25% ⚠
- ROI: 15% ✗
- Decision: RED - Don't launch
Real Examples: Break-Even Success & Failure
Success Story: Yoga Mat
The numbers:
- MOQ: 300 units
- COGS: $8/unit
- Selling price: $35
- Contribution margin: $35 - ($8 + $5 fees + $3 shipping) = $19
Fixed costs:
- Samples: $200
- Photography: $800
- Initial ads: $2,000
- Shipping container: $600
- Total: $3,600
Break-even: $3,600 / $19 = 190 units
Why it worked:
- Break-even 63% of MOQ (110 units buffer)
- Healthy 54% contribution margin
- Tested pricing with surveys first
- Sold 280 units in first 3 months
- Profit: (280 × $19) - $3,600 = $1,720
Failure Story: Bluetooth Speaker
The numbers:
- MOQ: 500 units
- COGS: $22/unit
- Selling price: $60
- Contribution margin: $60 - ($22 + $8 fees + $6 shipping) = $24
Fixed costs:
- Tooling: $5,000
- Samples (4 rounds): $800
- FCC compliance testing: $2,500
- Photography: $1,200
- Initial ads: $4,000
- Shipping: $2,000
- Total: $15,500
Break-even: $15,500 / $24 = 646 units
Why it failed:
- Break-even 129% of MOQ (need reorder to break even!)
- Fixed costs too high (compliance testing killed it)
- Underestimated ad costs (competitive market)
- Sold 320 units in 6 months, then stopped
- Loss: (320 × $24) - $15,500 = -$7,820
Lessons:
- Should have negotiated higher MOQ or lower tooling
- Compliance testing should have been researched first
- Competitive market needed more ad spend (wasn't viable)
Planning multiple product launches? Get automated profit analysis showing break-even points, margins, and ROI for every product in your catalog.
Analyze Product ProfitabilityWorks with Shopify, WooCommerce product data
Common Mistakes to Avoid
Learn from these common pitfalls to ensure success
Forgetting variable platform fees (% of sale price) in variable cost calculation
Solution: Variable cost per unit = COGS + Packaging + Shipping + (Price × Fee%). Shopify 3%, Amazon 15%, etc. Fees are variable, not fixed.
Using only first sample cost, not all 3-5 rounds you actually order
Solution: First sample: issues. Second: tweaks. Third: final approval. Realistically $300-$1,000 in samples total. Budget for 3+ rounds.
Comparing break-even to first order size, not MOQ required to reorder
Solution: MOQ might be 500 first order, but 200 reorders. If break-even is 180, you're fine on reorders but first order is risky. Account for both.
Setting profit target too low (just covering costs isn't enough)
Solution: Break-even isn't the goal. Add desired profit to fixed costs. Calculate units needed for meaningful profit (usually 2-3× break-even).
How to Verify Your Numbers
Ensure accuracy with these verification steps
Your contribution margin is positive (if negative, you lose money on every sale - don't launch)
Fixed costs + (Variable cost × MOQ) = Total investment (validates you've captured all costs)
Break-even units × Selling price = Break-even revenue (two formulas match)
At MOQ units, your projected profit = (MOQ × Contribution margin) - Fixed costs
Marketing spend to reach break-even units < 50% of fixed costs (or CAC is too high)
Frequently Asked Questions
What if I don't know my conversion rate yet?
Should I include my time/labor in fixed costs?
What if the supplier's MOQ is higher than my break-even point but I can't afford it?
How do I handle returns in break-even analysis?
What's a good target ROI for first product launch?
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