Break-even ROAS calculator
Break-even ROAS calculator
Build the margin from an order instead
Opening this overrides the margin above with the contribution margin these inputs produce. Returns take back the margin the returned order was carrying, which is why the rate is applied last.
Break-even ROAS
3.33
Break-even ROAS is the return on ad spend at which a campaign produces exactly as much gross profit as it cost to run. Below it, every order loses money. The arithmetic is one line — 1 ÷ margin — and the calculator above does it, but the number it produces is only as honest as the margin you feed it.
Why the margin input is the whole calculation
Most break-even calculations use gross margin, because it is the number people have. Gross margin subtracts the cost of goods and nothing else.
A real order also carries payment processing, pick and pack, outbound shipping net of whatever the customer paid, and the expected cost of returns. All of them scale with the order, so all of them belong in the subtraction. What is left is contribution margin, and the gap between the two is not small.
| Gross margin | Contribution margin | |
|---|---|---|
| Subtracts | Cost of goods | Goods, payment fees, fulfilment, shipping, returns |
| Typical figure | 45% | 30% |
| Break-even ROAS | 2.2 | 3.4 |
A campaign running at 2.8 looks profitable on the first number and loses money on the second. Use the detailed inputs in the calculator to build the second one, or read what actually gets subtracted.
Break-even ROAS at common margins
| Margin | Break-even ROAS | A 4.0 ROAS is |
|---|---|---|
| 10% | 10.0 | a heavy loss |
| 20% | 5.0 | a loss |
| 25% | 4.0 | exactly break-even |
| 30% | 3.33 | profitable |
| 40% | 2.50 | comfortably profitable |
| 50% | 2.00 | comfortably profitable |
| 60% | 1.67 | comfortably profitable |
The row worth sitting with is the third. A 4.0 ROAS is the figure most agencies report as a good month, and on a 25% margin it produced exactly zero profit.
What this number does not tell you
Three limits, because a calculator that only flatters itself is worth less than one that says where it stops.
- It is a first-order calculation. It asks whether one purchase paid for the ad
that caused it. A customer who buys again changes the answer entirely, which is what CAC payback period measures instead.
- It inherits your attribution. If the platform is claiming orders your store did
not record, the ROAS you type in is already wrong and no arithmetic downstream fixes it.
- It says nothing about fixed costs. Break-even here means the campaign covered
itself, not that the business made money. Rent and salaries sit outside this number.
Break-even is a floor, not a target. A campaign sitting exactly on it has spent
money to stand still.
For the fuller argument about dividing by profit rather than revenue, see what POAS is and how it differs from ROAS, or the rest of ad measurement.
Common questions
What is break-even ROAS?
The return on ad spend at which a campaign produces exactly as much gross profit as it cost. Below it you are paying to lose money; above it you are earning. It is one divided by your margin — at a 25% margin, break-even is a 4.0 ROAS.
How do you calculate break-even ROAS?
Divide one by your margin expressed as a decimal. A 40% margin gives 1 ÷ 0.40 = 2.5, so any ROAS under 2.5 loses money. The arithmetic is trivial; getting the margin right is the hard part, and it is where most calculations go wrong.
Should I use gross margin or contribution margin?
Contribution margin, if you have it. Gross margin subtracts only the cost of goods and ignores payment fees, fulfilment, shipping and returns — all of which scale with the order. On a typical catalogue that gap is the difference between a 2.5 and a 3.4 break-even, which is the difference between scaling and bleeding.
Is a 4.0 ROAS good?
It depends entirely on margin, which is why the question has no answer on its own. On a 60% margin a 4.0 ROAS is comfortably profitable. On a 25% margin it is exactly break-even. On a 10% margin it is a heavy loss. The number means nothing without the denominator.
Does break-even ROAS account for returns?
Only if your margin input does. Returns are one of the costs gross margin ignores. Use the detailed inputs above to subtract them, or accept that the answer is optimistic by roughly your return rate multiplied by your margin.
See it on your data
Loyalz joins ad spend to settled order lines, so the margin in this calculator is a column rather than a number you estimate once a quarter.
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