What is break-even ROAS?
Break-even ROAS is the lowest return on ad spend at which your ads pay for themselves. To find it, divide 1 by your pre-ad contribution margin as a decimal. A 40% margin gives a break-even ROAS of 2.5x.
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How to calculate Break-even ROAS
Divide 100 by your pre-ad contribution margin percentage.
Percentages in this equation use numeric percent values: 40 means 40%.
Why break-even ROAS matters
ROAS compares revenue to ad spend, but revenue isn't profit. Break-even ROAS tells you how much revenue each ad dollar must bring in to cover ad spend and all other variable costs of those sales.
It gives you a floor for judging campaigns. A campaign below that floor loses money on each sale, even if its ROAS looks healthy.
Which margin to use
Use pre-ad contribution margin: the share of revenue left after all non-ad variable costs, including product cost, shipping, fulfillment, payment fees, and expected returns. Exclude ad spend from this margin, since the formula calculates how much that margin can cover.
A gross margin that removes only product cost can understate the required ROAS. Keep the cost basis consistent and state it when sharing the result.
Limits of break-even ROAS
This is variable-cost break-even for a purchase or campaign, excluding fixed overhead and taxes, rather than company-wide break-even. If customers buy again, you may accept a lower first-order ROAS based on expected future contribution and risk.
Disclaimer
This calculator is for informational purposes only, and we don't guarantee the accuracy of its results. You're responsible for verifying any results before relying on them. See our terms of use.
Common questions
How do you calculate break-even ROAS?
Divide 1 by your pre-ad contribution margin as a decimal. For example, a 40% margin gives 1 divided by 0.40, which is a break-even ROAS of 2.5x.
What is the difference between ROAS and break-even ROAS?
ROAS is the revenue you earned for each ad dollar. Break-even ROAS is the level that ROAS must reach for your ads to cover their costs.
Does a higher margin lower break-even ROAS?
Yes. With a higher margin, each sale leaves more to pay for ads, so you need less revenue per ad dollar to break even.
Is break-even ROAS the same as a target ROAS?
No. Break-even ROAS leaves zero contribution after variable costs and ad spend, before fixed overhead and taxes. A target ROAS is usually higher so sales also contribute toward overhead and profit.
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