Break-Even ROAS Calculator
Calculate the break-even and target ROAS your ecommerce store needs before you scale budget, set channel targets, or judge campaign performance.
Enter your numbers
Offer numbers
Costs per order
Your result
Break-even ROAS
1.96x
Target ROAS
3.01x
Contribution margin %
51.0%
Contribution margin / order
$974.00
Max allowable CAC
$634.68
Margin buffer / order
$179.68
You still have roughly $179.68 of CAC room per order after allowing for overhead and target profit.
Contribution margin: 51.0%
What Is Break-Even ROAS?
Break-even ROAS is the minimum return on ad spend your ecommerce campaign needs to cover the variable costs of each order.
Those costs usually include:
- cost of goods sold
- shipping and fulfillment
- payment processing fees
- discounts
- returns and refunds
If your campaign is below break-even ROAS, every order from that campaign costs more to fulfill than it brings back after variable costs. If it is above break-even ROAS, the campaign is covering those costs, but it may still need a higher target ROAS to cover overhead and profit.
How Break-Even ROAS Is Calculated
The calculation starts with net revenue and contribution margin.
Net Revenue = AOV - Discounts - Expected Refunds
Contribution Margin = Net Revenue - COGS - Shipping - Payment Fees
Contribution Margin % = Contribution Margin / Net Revenue
Then:
Break-even ROAS = 1 / Contribution Margin %
For example, a 40% contribution margin gives a break-even ROAS of 2.5x. A 20% contribution margin gives a break-even ROAS of 5.0x. Lower margins require higher ROAS to stay profitable.
Break-Even ROAS vs Target ROAS
Break-even ROAS tells you when a campaign stops losing money on variable order costs. Target ROAS is the number you should aim for because it also leaves room for overhead and profit.
This calculator shows both:
- Break-even ROAS - the minimum ROAS needed to cover variable costs
- Target ROAS - the ROAS needed after overhead and your profit target
If your break-even ROAS is 2.5x and your target ROAS is 4.0x, a campaign at 3.0x is not failing, but it is not yet strong enough to scale comfortably.
Example Calculation
| Input | Value |
|---|---|
| Average order value | $210 |
| Discount rate | 8% |
| Refund rate | 4% |
| COGS | $72 |
| Shipping and payment fees | $18 |
| Overhead per order | $11 |
| Target profit margin | 12% |
In this example, the store has a healthy contribution margin, so the break-even ROAS is below 2.0x. Once overhead and profit are included, the target ROAS moves higher. That gap is important because a campaign can clear break-even and still fall short of the profit target.
How to Read Your Results
| Result | What it means |
|---|---|
| Break-even ROAS is high | Costs or discounts are leaving little room for paid ads |
| Target ROAS is much higher than break-even | Overhead or profit goals are raising the true target |
| Current ROAS clears both numbers | The campaign is covering costs and profit target |
| Current ROAS is below break-even | Improve margin, AOV, or CAC before scaling |
Common Mistakes to Avoid
- Using break-even ROAS as the success target
- Leaving discounts or refunds out of the calculation
- Setting ROAS targets from industry averages instead of real margins
- Scaling a campaign that clears break-even but misses target ROAS
Frequently asked questions
What is break-even ROAS?
Break-even ROAS is the minimum return on ad spend needed to cover all variable order costs — COGS, shipping, fees, discounts, and returns — without making or losing money. Any campaign running below this threshold is losing money on every sale it drives, even if the ROAS number looks positive.
How do you calculate break-even ROAS?
Break-even ROAS = 1 ÷ Contribution Margin Ratio. If your contribution margin is 30%, your break-even ROAS is 3.33x. That means you need at least $3.33 in revenue for every $1 in ad spend just to cover variable costs. Your target ROAS should be higher than this to also cover fixed overhead and profit.
What is the difference between break-even ROAS and target ROAS?
Break-even ROAS is the floor — the minimum return needed to avoid losing money on variable costs. Target ROAS is higher, adding room for fixed overhead and profit. Break-even ROAS tells you when to pause a campaign. Target ROAS tells you what level to aim for when scaling spend.
What is the difference between ROAS and ROI?
ROAS measures revenue generated per dollar of ad spend. ROI measures net profit after all costs — COGS, shipping, fees, and overhead — against total investment. A campaign can show strong ROAS but negative ROI if costs are high. Break-even ROAS is the point where revenue starts to cover all variable costs.
Can break-even ROAS be too high for a paid channel to reach?
Yes. If your contribution margin is 15%, break-even ROAS exceeds 6.5x — a level most paid channels cannot consistently deliver. In that case, scaling with paid ads requires improving margins, raising average order value, lowering fulfillment costs, or reducing return rates before advertising becomes viable.
Why do discounts and return rates affect break-even ROAS so much?
Discounts and returns reduce realized revenue per order, which lowers contribution margin and raises the ROAS needed to break even. A 10% return rate or 15% average discount can add one or more ROAS points to your break-even — turning campaigns that appeared profitable into ones that are not.
How does break-even ROAS relate to target ROAS in Google Ads?
In Google Ads, target ROAS (tROAS) is the return you ask the algorithm to optimize toward. Setting tROAS below your break-even means optimizing for unprofitable outcomes. Your tROAS should be set above break-even to cover variable costs, and ideally above your target ROAS to account for fixed costs and margin.
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Keep ROAS targets tied to real ecommerce costs
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