Break-even ROAS

Break-even ROAS is the ROAS at which an order earns exactly its own ad cost back. It equals 1 divided by the contribution margin.

Stock photos and example labels, not customers.

Definition

Break-even ROAS is the ROAS at which an order earns exactly its own ad cost back. It equals 1 divided by the contribution margin.

FormulaBreak-even ROAS = 1 / contribution margin (as a fraction of revenue)

Example with made-up numbers: With a contribution margin of 40% (0.40), break-even ROAS = 1 / 0.40 = 2.5.

How to use it

Below it, every sale loses money after variable costs. Above it, each sale contributes toward fixed costs and profit. It is the cutoff to use when deciding which campaigns to scale or stop.

Compute it from contribution margin, not from gross margin alone, so shipping, payment fees and returns are inside the number.

Related terms

Contribution margin Platform ROAS MER

Go deeper

Measurement

How to calculate break-even ROAS for an ecommerce client

Break-even ROAS is the line between an ad that loses money and one that pays for itself. It takes three inputs and one division.

6 min read Free tool

Break-even ROAS calculator

Turn product cost, shipping, fees and returns into the ROAS an ad needs to break even.

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