ADSSystem

Break-even ROAS calculator

The numbers a campaign has to beat before it makes money – and the target that adds your margin.
In one line

Enter order value, margin and variable costs to find the ROAS and CPA you must beat before a campaign makes money.

Break-even ROAS = 1 ÷ Contribution margin
$
%
$
Shipping, payment fees, packaging, returns allowance.
%
Optional. What you want to keep after ad spend.
Break-even ROAS -
Break-even CPA-
Contribution per order-
Target ROAS-
Target CPA-
Break-even is the floor. The target line adds the net margin you want to keep.
Above the line or below itMargin sets the bar4.2Apparel3.1Supplements2.6Furniture1.7ElectronicsBREAK-EVEN 2.9

The formulas

Break-even ROAS = 1 ÷ Contribution margin

Break-even CPA = AOV × Contribution margin
Contribution margin is what remains from an order after everything that scales with it: cost of goods, shipping, payment processing, packaging and expected returns. It is not gross margin, and the difference is usually five to fifteen points.

Why this beats guessing a target ROAS

Most accounts run a target ROAS that somebody picked because it sounded ambitious. Once you know break-even, the target stops being arbitrary: set it above break-even by the net margin you want and the bidding algorithm receives a meaningful instruction.

It also tells you when to stop. If break-even is 3× and the campaign has run at 2.4× for a quarter, the answer is not more optimisation – the unit economics do not support the channel at current prices.

Two errors that cost real money

Using gross margin instead of contribution margin. This sets the bar too low and quietly loses money on every sale. On a $120 order with 40 percent gross margin and $8 of variable cost, true contribution is 33 percent, and break-even is 3.0× rather than 2.5×.

  • Applying one break-even across a whole catalogue. Margins differ by product line, sometimes by thirty points.
  • A single average lets the high-margin products subsidise the low-margin ones while both look fine.
  • Segment campaigns by margin band and give each its own target.

New customer economics

If you have repeat purchase data, break-even on first order is the wrong bar.

If you have repeat purchase data, break-even on first order is the wrong bar. A business where 35 percent of customers buy again within a year can afford to acquire at a loss on the first sale and profit over the relationship.

Work out contribution margin across the expected customer lifetime, then set break-even against that. Be conservative with the repeat rate – it is the assumption most likely to be wrong, and the one that decides how much you are willing to lose up front.

Frequently asked

Divide one by your contribution margin. A 33 percent contribution margin gives a break-even ROAS of about 3.0×.
No. Break-even is where you neither gain nor lose. Target ROAS should sit above it by whatever net margin you intend to keep.
Contribution margin. Gross margin ignores shipping, payment fees and returns, which sets the break-even bar too low.