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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.

The formula

Break-even ROAS = 1 / contribution margin, where the margin is a fraction of revenue. A 40% margin (0.40) gives 2.5.

Work out the contribution margin

Start from revenue per order and take away every cost that rises with each order.

  • Product cost.
  • Shipping and packaging you pay for.
  • Payment fees.
  • An allowance for returns and refunds.
Example with made-up numbers: an order of 100 with 35 product cost, 10 shipping and fees and 5 expected returns leaves 50. The margin is 50%, so break-even ROAS is 2.0.

How to use the cutoff

A campaign below break-even loses money on each sale before fixed costs. A campaign above it contributes. The gap between actual ROAS and break-even is the room you have to scale or to test.

Common mistakes

  • Using gross margin and ignoring shipping, fees and returns.
  • Comparing break-even ROAS, which is revenue-based, with a CPA figure.
  • Using one margin for a catalog where products have very different margins.
  • Forgetting that a first order may only break even while repeat orders create the profit.

You can try your own numbers in the break-even ROAS calculator.

6 min read. Last updated 2026-10-07. Examples use made-up numbers.

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Terms in this guide

Break-even ROASContribution marginAOV

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