How to use the break-even ROAS calculator
Enter the price the customer pays per order, excluding sales tax or VAT. If customers often buy several items, use your average order value.
Add the cost of goods for that order and what you pay to ship it.
Enter payment processing fees as a percentage plus any fixed fee per transaction.
Add other variable costs per order, such as packaging, per-order app fees or pick-and-pack charges.
Set the profit you want to keep after ads, as a share of revenue, to see a target ROAS and target CPA.
The break-even ROAS formula
- Contribution=price − COGS − shipping − (price × fee %) − fixed fee − other costs
- Break-even ROAS=price ÷ contribution
- Max CPA=contribution
- Target ROAS=price ÷ (contribution − price × target profit %)
- Price
- What the customer pays per order, excluding tax.
- COGS
- Cost of goods: what you pay for the product, including inbound freight and duties if you track them per unit.
- Fee % and fixed fee
- Payment processor charges, usually a percentage of the order plus a fixed amount per transaction.
- Contribution
- Money left from one order before advertising. It is the most you can spend to win that order without losing money.
Break-even ROAS is the same as 1 ÷ contribution margin, where contribution margin = contribution ÷ price.
Worked example
A 49 product with typical costs
- Price 49, COGS 14, shipping 6, payment fees 2.9% + 0.30, other costs 2.
- Fees = 49 × 0.029 + 0.30 = 1.72.
- Contribution = 49 − 14 − 6 − 1.72 − 2 = 25.28.
- Break-even ROAS = 49 ÷ 25.28 = 1.94x, and max CPA = 25.28.
- To keep 15% of revenue as profit: target CPA = 25.28 − 7.35 = 17.93, so target ROAS = 49 ÷ 17.93 = 2.73x.
Why break-even ROAS comes first
Every ROAS target, scaling rule and kill rule should be anchored to break-even. Without it, a 2.5x campaign can look strong while quietly losing money, and a 1.8x campaign can be switched off when it was profitable.
Calculate it per product or per typical basket rather than once for the whole store. A bundle with a higher order value and shared shipping usually has a much lower break-even ROAS than a single low-priced item.
| Contribution margin | Break-even ROAS |
|---|---|
| 60% | 1.67x |
| 50% | 2.00x |
| 40% | 2.50x |
| 30% | 3.33x |
| 20% | 5.00x |
First-order break-even versus lifetime value
This calculator works on the first order. If customers reliably come back, you can afford to break even, or even lose a little, on the first purchase and earn the profit later. Subscription and consumable brands often do this deliberately.
Only do it with evidence. Look at what a cohort of customers actually spent over 90 or 180 days, not what you hope they will spend, and make sure you have the cash to wait for the return. The LTV to CAC calculator helps with this.
Costs people forget
Leaving any of these out makes break-even look easier than it is. When in doubt, overestimate costs rather than underestimate them.
- Payment fees on the full order value, including any shipping you charge the customer.
- Refunds, returns and chargebacks, which can take several percent of revenue in apparel and gadgets.
- Discount codes and free shipping thresholds that lower the real average price.
- Per-order app fees for reviews, upsells or subscriptions, plus packaging inserts.
- Currency conversion fees when you buy or sell in another currency.
Questions and answers
What is break-even ROAS?+
The ROAS at which ad-driven revenue exactly covers product, fulfilment, fees and ad costs, leaving zero profit. Above it you make money on the order; below it you lose money.
How do I calculate break-even ROAS?+
Divide the selling price by the contribution per order, which is price minus all variable costs except ads. Equivalently, divide 1 by your contribution margin. A 40% margin gives a break-even ROAS of 2.5.
What is the difference between break-even ROAS and target ROAS?+
Break-even ROAS leaves no profit. Target ROAS is higher because it also reserves the profit you want to keep after ads. Evaluate campaigns against target, and use break-even to decide when something is genuinely losing money.
What is maximum CPA?+
The highest cost per acquisition you can pay before an order loses money. On the first order it equals your contribution per order. Max CPA and break-even ROAS describe the same limit from two angles.
Should I use average order value instead of product price?+
Yes, if customers often buy more than one item. Use average order value with the average costs per order, because shipping and payment fees are charged per order rather than per unit.
Does break-even ROAS include fixed costs like salaries and software?+
No. It covers variable costs per order only. Fixed overheads are paid from the profit left after ads, which is why most brands target a ROAS comfortably above break-even.