Break-Even ROAS Calculator

What “Break-Even ROAS” Really Means

Break-even ROAS is the minimum return on ad spend you need to avoid losing money on a sale. It answers a simple question: how many dollars of revenue must each ad dollar produce so that profit becomes zero? If your actual ROAS is above break-even, your ads are profitable on the terms you entered. If it’s below, each incremental dollar of spend is likely reducing profit (unless you’re intentionally buying growth, building LTV, or running a longer payback plan).

The key detail is that “break-even” depends on your unit economics: gross margin, shipping and fulfillment, gateway fees, platform fees, returns, and any other variable costs that scale with revenue or orders. A brand with a 75% gross margin can break even at much lower ROAS than a brand with a 35% margin. The same is true if shipping is expensive or returns are high. That’s why the most useful ROAS target is not “what other advertisers claim,” but what your numbers demand.

ROAS vs CPA: Two Sides of the Same Coin

ROAS and CPA are connected by your conversion value. If you know the average order value (AOV), you can convert between them: a higher ROAS implies a lower CPA, and a higher CPA implies a lower ROAS. This calculator gives you both so you can work in whichever language your team uses:

• ROAS helps when you think in revenue per ad dollar (common in reporting dashboards).
• CPA helps when you think in cost per sale (common in bid strategies and media buying).

For many businesses, the practical planning question is: “What is the maximum CPA we can pay and still be okay?” Once you have that number, you can set guardrails, test creatives safely, and avoid growth that quietly drains cash.

Contribution Margin: The Hidden Driver of Break-Even ROAS

Break-even ROAS is driven by contribution margin: the part of each revenue dollar that remains after product costs and variable expenses (before ad spend). Think of contribution margin as “how much room you have to pay for ads.” If your contribution margin is 40%, then you can spend up to 40% of revenue on ads and still break even. That implies a break-even ROAS of 1 ÷ 0.40 = 2.5.

This tool calculates contribution margin using both percentage-based costs (like payment fee %) and per-order costs (like shipping or a fixed gateway fee). That matters because per-order costs hit lower AOVs harder. A $1 fixed fee on a $20 order is 5% of revenue; the same fee on a $200 order is 0.5%.

What Costs Should You Include?

1) Gross margin

Gross margin is revenue minus cost of goods sold (COGS), expressed as a percent of revenue. If you sell a product for 200 and your COGS is 80, gross profit is 120 and gross margin is 60%. Gross margin is the foundation of the model because it determines the maximum “room” you have for all other costs.

2) Shipping and fulfillment

If you pay for shipping labels, 3PL pick/pack, packaging, or any per-order handling cost, include it. Even if you charge customers shipping, you can include net shipping cost after the shipping charge if you want a tighter view.

3) Payment processing

Gateways often charge a percentage plus a fixed fee (for example, 2.9% + 0.30). This tool supports both. Payment fees scale with revenue, and fixed fees scale with orders, so together they can materially change your break-even ROAS.

4) Platform or marketplace fees

Some channels take a revenue cut (marketplace commissions, app store fees, affiliate platforms). If the fee is a percentage of revenue, add it as a percent. If it’s per order, use “other variable costs per order.”

5) Returns and refunds allowance

Returns are often lumpy, which makes them easy to ignore until they spike. A practical approach is to include a conservative returns allowance as a percentage of revenue. That way your break-even targets remain stable even if returns vary week to week.

Break-Even ROAS vs “Fully Loaded” Break-Even ROAS

Many advertisers talk about break-even ROAS as if it includes everything. In reality, most break-even calculations are “unit only” (COGS and variable costs) and exclude fixed overhead like rent, salaries, software subscriptions, or warehouse costs. If you want a more complete picture, allocate fixed costs across expected orders. This calculator lets you add monthly fixed costs and expected monthly orders to compute an allocated fixed cost per order and incorporate it into break-even.

The right choice depends on the question you’re answering:

• Unit break-even is ideal for channel testing and bid guardrails.
• Fully-loaded break-even is ideal for budgeting and knowing what efficiency you need to cover overhead.

Target Profit: When “Break Even” Isn’t the Goal

If you want to grow profitably, break-even is only the floor. Use the Target Profit options to set a profit goal per order or as a profit margin percent. The calculator then returns the ROAS and CPA you need to hit that goal with your current costs.

This is especially useful for planning promotions. If you lower price or offer a discount, your AOV and gross margin shift. Running the updated numbers lets you see how much ROAS needs to improve to keep profitability stable.

How to Use the Scenario Table

Real performance moves. Creative fatigue, seasonality, and auction volatility can shift ROAS quickly. The Scenario Table shows what your profitability looks like across a range of ROAS outcomes for a given spend level. This helps you answer “what if” questions:

• What happens if ROAS drops from 2.5 to 2.0 for two weeks?
• How profitable are we if we hit 3.2 ROAS during a sale?
• At what ROAS level does profit become meaningful again?

Export the table to CSV and use it in planning documents, dashboards, or weekly business reviews.

Common Mistakes That Make ROAS Targets Misleading

Mixing attribution ROAS with cashflow ROAS

Platform-reported ROAS can be optimistic or conservative depending on attribution windows, view-through credit, and tracking. Your bank account does not care about attribution. If you use platform ROAS, compare it to historical reality (what happened to revenue and profit when ROAS moved) and adjust your targets accordingly.

Ignoring refunds, chargebacks, and discounts

Promotions can raise conversion rate and ROAS while reducing gross margin. Refunds and chargebacks can reduce true revenue. If your reported ROAS looks great but profit is flat, this is often why.

Using AOV when LTV is the real metric

Subscription brands and repeat-purchase businesses often can afford a lower first-order ROAS because customers reorder. In those cases, you can use an “effective AOV” that represents LTV within your payback window (for example, 60-day LTV) so the break-even target matches your model.

Quick Worked Example

Suppose AOV is 200, gross margin is 60% (so gross profit is 120), shipping/fulfillment is 20, payment fees are 2.9% + 1, and there are no other fees. Payment percent is 5.8 and fixed is 1. Total variable costs beyond COGS are 26.8, so contribution before ads is 120 - 26.8 = 93.2. Break-even CPA is 93.2, and break-even ROAS is 200 ÷ 93.2 ≈ 2.15. If your actual ROAS is 2.6, you’re above break-even; if it’s 1.8, you’re below.

Limitations and Safe Use Notes

This calculator is a planning tool. It does not know your attribution model, delayed refunds, inventory constraints, or the difference between new vs returning customer economics unless you reflect those in your inputs. For high-stakes decisions, use your accounting numbers and consider running scenarios with conservative assumptions.