Breakeven ROAS Calculator

The number every ROAS target should start from

Breakeven ROAS is the return at which advertising neither makes nor loses money. Anything above it is profit, anything below is subsidy. It depends entirely on your gross margin:

A 50% margin needs a ROAS of 2.0 to break even. A 25% margin needs 4.0. An 80% margin needs 1.25. This is why a single industry-wide "good ROAS" figure is meaningless: the same return is excellent for one margin structure and ruinous for another.

Use contribution margin, not gross margin

Gross margin usually stops at cost of goods. For an accurate breakeven you need contribution margin, which also subtracts the costs that scale with each order:

• Payment processing fees, typically 2 to 3%
• Shipping and fulfilment, including free-shipping subsidies
• Returns and refunds, at your actual rate rather than your target rate
• Packaging and per-order handling

Skipping these is the single most common reason campaigns that "hit target" still lose money.

Breakeven is a floor, not a goal

Running exactly at breakeven means advertising contributes nothing to fixed costs. The gap between breakeven ROAS and your target ROAS is where overhead, salaries and profit come from. Decide that gap deliberately rather than inheriting a target from a benchmark article.

The exception is deliberate: if repeat purchase rates are high and measured, running near breakeven on first orders to buy customers can be sound. That is a decision about acquisition cost and lifetime value, and it only works if you have the repeat data to support it.

Cost context by industry

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