What ROAS do I need to break even?
Break-even ROAS is the revenue an advertising dollar must generate to cover an order’s variable costs. Divide net revenue by contribution margin before ads, or divide one by the margin expressed as a decimal. Fixed overhead requires an additional buffer.
Selling on Amazon? Estimate Amazon FBA profit after fees and costs to see how these costs affect each unit’s margin.
The formula, explained.
Contribution margin = net revenue − non-ad variable costs Break-even ROAS = net revenue ÷ contribution margin Maximum CPA = contribution margin
A worked example
- Start with a $50 order after discounts, excluding pass-through sales tax. Suppose product cost is $18, seller-paid shipping is $5, fulfillment and packaging total $3, and payment fees are $2. Allow another $2 for expected unrecovered return costs. These non-ad variable costs total $30, leaving $20 contribution margin before advertising.
- Divide the $50 revenue by the $20 contribution margin: break-even ROAS is 2.50×. Equivalently, the margin is 20 ÷ 50 = 0.40, so 1 ÷ 0.40 gives the same result. Spending $20 to acquire the order uses the entire contribution margin. This maximum CPA covers variable costs but leaves nothing for overhead or profit.
- Now reserve $5 contribution profit per order. Only $15 remains available for advertising, so the required ROAS rises to 50 ÷ 15 = 3.33×. Compare this target with revenue measured on the same basis in your ad account. If reported revenue includes refunds or tax that your order model excludes, reconcile those differences before increasing your budget.
How to interpret your result
A campaign above your break-even ROAS earns contribution profit after advertising. Set your target higher to leave room for fixed overhead and a profit buffer. At a 40% contribution margin, a 3× ROAS produces $6.67 in contribution profit on a $100 order.
Common mistakes to avoid
Using gross margin without shipping, payment fees, discounts and expected return losses makes the target look easier than it is. Use the same revenue definition in your ad reporting and this calculator.
Frequently asked questions
What ROAS do I need to break even?
An order earns $100 in net revenue and costs $60 before advertising. Contribution margin is $40, or 40%. Break-even ROAS is 100 ÷ 40 = 2.50× and maximum CPA is $40. A campaign above your break-even ROAS earns contribution profit after advertising. Set your target higher to leave room for fixed overhead and a profit buffer. At a 40% contribution margin, a 3× ROAS produces $6.67 in contribution profit on a $100 order.
What is a good break-even ROAS?
There is no universal good number, because break-even ROAS depends entirely on your contribution margin. A store with a 60% margin breaks even near 1.67×, while a store with a 20% margin needs 5× just to reach zero profit. Compare your ROAS against your own break-even and target, not a benchmark from another store or industry.
Is a 2.5 ROAS good?
It depends entirely on your contribution margin. A 2.5× ROAS is exactly break-even at a 40% contribution margin, meaning $1 of ad spend returns $2.50 in revenue but $0 in profit once product cost, fulfillment and fees are covered. At a 25% margin, 2.5× ROAS is a loss. At a 60% margin, it leaves solid contribution profit. Enter your own numbers above to find your break-even, then judge 2.5× against that figure rather than in isolation.
What does a 4:1 ROAS mean?
A 4:1 (or 4×) ROAS means every $1 of ad spend generated $4 in attributed revenue. It says nothing about profit on its own, since profit depends on the non-ad costs behind that revenue. On a $100 order with a 40% contribution margin, $40 covers a 2.5× break-even ROAS; the extra revenue above break-even at 4× leaves meaningfully more contribution profit than at 2.5×, but you still need the margin figure to know how much.
What is the difference between break-even ROAS and target ROAS?
Break-even ROAS is the floor: the point where advertising spend consumes the entire contribution margin and profit is zero. Target ROAS should sit above that floor, with an added buffer for the profit you want to keep and a share of fixed overhead.
How do I lower my break-even ROAS?
Break-even ROAS equals revenue divided by contribution margin, so it falls only when margin grows relative to revenue: raise price, reduce product or fulfillment cost, negotiate payment or shipping fees, or cut return losses. Improving ad performance does not lower the threshold itself; it only makes the existing threshold easier to clear.
Break-even ROAS vs MER — what is the difference?
Break-even ROAS is calculated per order or product from that item's own contribution margin, using channel-attributed revenue. Marketing efficiency ratio (MER) divides total store revenue across all channels by total marketing spend, so it also reflects brand and cross-channel effects that a single-channel ROAS can miss. Track both together.
Does break-even ROAS include shipping and sales tax?
This calculator's break-even ROAS already subtracts seller-paid shipping, fulfillment, packaging, payment processing and expected return costs as variable costs. Sales tax is excluded because it passes through to the tax authority rather than your margin. Keep your ad platform's reported revenue defined the same way, or the comparison will be off.
What ROAS is a 25% ACoS?
ACoS (advertising cost of sale, used mainly on Amazon) and ROAS are reciprocals: ROAS = 1 ÷ ACoS. A 25% ACoS equals a 4× ROAS, and a 4× ROAS equals a 25% ACoS. Whether that 25% ACoS is profitable still depends on your contribution margin outside of advertising, exactly as with ROAS — a low ACoS is not automatically a profitable one.
Does this break-even ROAS calculator work for dropshipping and Facebook or TikTok ads?
Yes. The formula and this calculator are platform-agnostic — they work the same way for Facebook, TikTok, Google or any other ad channel, and for dropshipping stores as well as stores holding their own inventory. For dropshipping, make sure the product cost field reflects your actual per-order supplier cost (which is often close to your entire margin), and enter your real shipping time and return rate rather than a generic estimate.
Can I change the assumptions?
Yes. All inputs can be edited, and advanced assumptions are available below the main inputs. Use values from the same period and currency. Changing display currency changes the symbol, not the underlying amount.
Are my financial numbers saved?
No. Calculations happen locally in your browser. Sharing creates a link containing the inputs, and exporting saves a CSV report to your device. You choose whether to share those artifacts.
Sources & methodology
Learn more about our calculation methodology and estimate limitations.