Break-even ROAS calculator
Break-even ROAS is the return on ad spend at which your ads pay for themselves and nothing more. It equals 1 divided by your gross margin. A product with a 40% margin breaks even at a ROAS of 2.5 (1 / 0.40). Every $1 of ads needs $2.50 of revenue, and the $1 of margin in that revenue pays for the ad.
The same numbers give your maximum cost per purchase (CPA). It is the contribution per order: the price minus the cost of goods and the other per-order costs. Pay more than that per purchase and each sale loses money.
- Break-even ROAS
- 2.5x
- 1 / 40% gross margin.
- Max CPA at break-even
- $40.00
- Contribution per order: price minus costs.
- Gross margin
- 40%
- $40.00 left per order before ads.
How it is calculated
- Contribution per order = price - cost of goods - other variable costs per order
- Gross margin = contribution per order / price
- Break-even ROAS = 1 / gross margin (the same as price / contribution per order)
- Max CPA at break-even = contribution per order
- Target ROAS for a margin you want to keep = 1 / (gross margin - target margin)
Worked example
A product sells for $100. It costs $55 to make and $5 to ship and process. Contribution per order is $40 and gross margin is 40%. Break-even ROAS is 1 / 0.40 = 2.5, and the max CPA is $40.
To keep 15% of the price as profit after ads, the target ROAS is 1 / (0.40 - 0.15) = 4.0. That is a max CPA of $25.
Definitions
FAQ
Use the share of the selling price left after every cost that scales with each order. That means the product, shipping you pay for, payment processing, packaging and the returns you expect. Leave out fixed costs such as salaries, rent and software. They do not change with one more order, and the break-even ROAS answers a narrower question: does each extra order pay for its own ad.
At break-even the ads return exactly their cost, so the profit on each order is zero. To make money you need a margin left after ads. Enter the net margin you want to keep and the calculator returns the target ROAS. The target rises fast as that margin approaches your gross margin, because less and less is left to pay for ads.
Yes. A discount lowers the price but not the cost of goods, so the margin shrinks and the break-even ROAS rises. Run the calculator with the discounted price when you plan a sale, and check that the ROAS you expect during the sale stays above it.
Meta's cost per result goal bid strategy and Google's Target CPA bidding both take a cost target per result. When the result is a purchase, the max CPA from this calculator is the highest target you can set without losing money on each order. A target below it leaves room for profit.
Then there is no break-even ROAS. Every order loses money before ads, and no ROAS fixes that. The calculator shows a message instead of a number. Raise the price, cut the per-order costs, or run the numbers on the average order rather than on the cheapest product.
Yes when customers buy several items or you sell many products. Use the average order value as the price and the average cost of goods per order as the cost. The break-even ROAS then applies to the account or the campaign rather than to a single product.
There is no typical figure. Break-even ROAS is set by your margin, and margins vary by industry, product and business model. A high-margin service can break even below 1.5 while a low-margin retailer needs more than 5. Use your own numbers; a benchmark from another business tells you nothing about yours.
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