Method and assumptions
Break-even ROAS is determined by contribution margin before advertising, not by gross margin alone. Include every variable cost that increases when an order is placed.
Maximum CPA = order revenue - variable costs. Break-even ROAS = order revenue / maximum CPA. Break-even ACOS = maximum CPA / order revenue.
Worked scenario
Start with an 80 USD order and enter every non-ad variable cost: product, marketplace, payment, fulfillment, shipping, packaging and expected returns. If those costs total 52 USD, the 28 USD remainder is the theoretical ad allowance at break-even. Reserve a profit target before using the result as a campaign goal.
How to interpret the result
Break-even ROAS is product-specific because contribution rates differ. A portfolio average can hide products that lose cash at the same campaign target. Use net revenue on the same attribution basis as spend, and rerun the model whenever price, fee, promotion or fulfillment cost changes materially.
Input reference
- Currency
- Example default: USD
- Average order revenue
- Example default: 60
- Product cost
- Example default: 18
- Shipping and fulfillment
- Example default: 7
- Payment and platform fee rate
- Example default: 4%
- Fixed order fees
- Example default: 0.3
- Returns allowance
- Example default: 3%
- Other variable costs
- Example default: 1.5
Common mistakes
- Using gross margin before marketplace and fulfillment charges.
- Setting the operating target exactly at theoretical break-even.
- Mixing attributed gross sales with net-of-return economics.
Before using the result
- Calculate pre-ad contribution for each major product.
- Reserve a margin buffer for volatility and overhead.
- Review the target after any material cost change.
Questions to check before deciding
Is a higher or lower break-even ROAS better?
A lower break-even ROAS means the order has more room to absorb advertising cost. Your target ROAS should normally be above break-even.
Does this include fixed overhead?
It focuses on per-order contribution. Allocate overhead separately when setting a profit target above break-even.
Independent calculator. Not affiliated with or endorsed by the platforms mentioned.