Fixed Costs are business expenses that stay the same regardless of how much you sell. Rent remains $2,000 whether you sell 10 products or 10,000. E-commerce businesses track fixed costs to calculate break-even points, set pricing, and understand their cost structure.
What are Fixed Costs?
Fixed costs represent commitments your business must pay regardless of activity level. They form the baseline expense that revenue must cover before generating profit.
For e-commerce, typical fixed costs include:
- Website hosting and domain fees
- E-commerce platform subscriptions (Shopify, BigCommerce)
- Warehouse or office rent
- Employee salaries (not commissions)
- Insurance premiums
- Software tools (email marketing, analytics)
- Loan or equipment payments
Unlike that scale with sales, fixed costs create consistent monthly obligations.
How Fixed Costs Affect Break-Even
Higher fixed costs require more sales to break even. A business with $5,000 monthly fixed costs needs more revenue than one with $2,000, assuming equal contribution margins.
Example:
- Fixed costs: $10,000/month
- per unit: $20
- Break-even: $10,000 ÷ $20 = 500 units
Reducing fixed costs directly lowers the break-even threshold and increases .
Use our Break-Even Calculator to see how changes in fixed costs affect your and profitability.
