Break-even ROAS calculator
Find the revenue-to-spend multiple required to cover ads from your pre-ad contribution margin.
Last updated
Written by Madly editorial
01 / Your inputs
Run the numbers
Example figures are filled in so you can see a result straight away. Replace them with your own. Results update as you type; no data is sent or saved.
Worked cost stack: £60 net revenue − £25 goods − £5 fulfilment − £2 fees − £4 expected returns = £24 pre-ad contribution (40%). Include all variable costs, not only goods; £60 / £24 = 2.5×.
02 / Calculation
Break-even ROAS
Calculated result
2.5×
Unit: ×
Formula
Break-even ROAS (×) = 1 ÷ pre-ad contribution margin rate (as a decimal).
How to read this
A measured ROAS above this point only covers the costs included in your margin. Check your own attribution and fixed costs.
Assumptions
Margin includes product, payment, shipping, returns and other variable costs where applicable. Fixed overhead, tax and future purchases are excluded.
How to use this tool
- Work out your contribution margin as a percentage of the selling price, after cost of goods, shipping, fees and an allowance for returns.
- Enter that margin.
- Read the break-even ROAS, which is 1 divided by the margin.
- Use it as the floor when reading platform ROAS, and set a higher target if you also need profit.
Worked example
Illustrative example: a 40% pre-ad contribution margin implies 2.5× break-even ROAS.
What this measures
A break-even ROAS depends on what remains from a sale after variable costs but before ads.
Formula and units
Break-even ROAS (×) = 1 ÷ pre-ad contribution margin rate (as a decimal).
Assumptions and review notes
Margin includes product, payment, shipping, returns and other variable costs where applicable. Fixed overhead, tax and future purchases are excluded.
A measured ROAS above this point only covers the costs included in your margin. Check your own attribution and fixed costs.
Break-even is a floor, not a goal. Hitting it means ads pay for themselves and nothing else. If your store carries rent, salaries or software, you need a higher ROAS to make a profit, and a business that depends on repeat orders may accept a lower first-order ROAS. Be explicit about which of those you are doing.
- Which costs you include in margin.
- Return and refund rate.
- Whether you value repeat purchases.
- Fixed overheads that ads must help cover.
- Using gross margin before shipping and fees, which understates the break-even.
- Forgetting returns on categories such as clothing.
- Treating break-even as a target.
- Using a margin from a different product or discount level.
A closer look
Common questions.
- How do I calculate break-even ROAS?
- Divide 1 by your contribution margin as a decimal. A 40% margin gives 2.5.
- What margin should I use?
- Use margin after product cost, shipping, payment fees and expected returns, on the actual selling price.
- Can I run below break-even?
- Sometimes, if repeat purchases make a customer worth more than the first order. Know your numbers before choosing that.
- Is break-even ROAS the same as target ROAS?
- No. Target ROAS should sit above break-even by whatever profit and overhead cover you need.
- What about discounts?
- Discounts lower margin and raise break-even ROAS. Recalculate when you change price.