Break-Even ROAS (Break-Even Return on Ad Spend)
Break-even ROAS is the minimum ROAS needed to cover product costs and fees — anything above it is profit on the contribution margin.
Break-even ROAS is the profitability threshold for a paid campaign. It tells you the minimum return on ad spend required to cover the variable costs (product cost, shipping, payment fees) of the orders that ad spend generates.
The formula divides your selling price by the contribution margin per unit. The lower your margin, the higher the ROAS you need to break even. A product selling for $60 with a $36 contribution margin has a break-even ROAS of 1.67x.
To cover fixed costs and earn real profit, target 1.5–2× your break-even ROAS. Use the break-even ROAS calculator to find your floor, then set campaign targets above it.
Formula
Break-even ROAS = Selling price ÷ Contribution margin per unit
Example
Related terms
ROAS
ROAS is the revenue earned for every dollar spent on advertising, expressed as a multiple (4x means $4 back per $1 spent).
POAS
POAS is the gross profit generated for every dollar of ad spend, giving a more accurate profitability measure than ROAS.
AOV
AOV is the average dollar amount spent per order, calculated as total revenue divided by total number of orders.
CPA
CPA is the average advertising cost to acquire one customer or conversion, calculated as total ad spend divided by total conversions.