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