Break even ROAS formula
The break-even ROAS is the revenue per ad dollar at which an order’s contribution exactly pays for the ads that bought it, which is 1 divided by the contribution margin ratio. The contribution margin ratio is the share of the selling price left after variable costs.[1]
- Variable cost$30.00
- Contribution$30.00
- Break-even ROAS2x
- Break-even CPA$30.00
Why it works: at ROAS = R, ads cost 1/R of revenue. Profit after ads is margin − 1/R of revenue, which is zero when R = 1 ÷ margin. Every multiple above it is profit; below it, loss.
Break-even ROAS by margin
| Contribution margin | Break-even ROAS | As % | Break-even CPA |
|---|---|---|---|
| 15% | 6.67x | 667% | $15 |
| 20% | 5x | 500% | $20 |
| 25% | 4x | 400% | $25 |
| 30% | 3.33x | 333% | $30 |
| 40% | 2.5x | 250% | $40 |
| 50% | 2x | 200% | $50 |
| 60% | 1.67x | 167% | $60 |
| 75% | 1.33x | 133% | $75 |
Thin margins need very high ROAS: at 20% you need 5x just to break even. That is why low-margin shops cap ad spend and high-margin digital products can scale on a ROAS that looks weak. To keep a profit as well, the target is 1 ÷ (margin − profit share): here 2.5x keeps 10% of revenue. What is a good ROAS explains how to set that goal.
Using it in ad platforms
Google Ads’ Target ROAS is the average conversion value you would like for each dollar spent, entered as a percentage;[2] a break-even of 2x is entered as 200%. Meta’s purchase ROAS is calculated as purchase value ÷ amount spent,[3] so you can compare it directly. If you bid on a cost per conversion instead, use the break-even CPA as the ceiling for Target CPA,[4] or work it out in the CPA calculator. To check a live campaign against the line, use the ROAS calculator.
Costs people leave out
- Payment and marketplace fees. A 3% card fee on a $60 order is $1.80 per sale; marketplace commissions can be far larger.
- Free shipping. If you pay the carrier, shipping is a variable cost even when the customer sees $0.
- Returns. If 8% of orders come back, add an allowance per order or reduce revenue accordingly.
- Fixed costs. Rent and salaries are not variable costs, so they stay out of break-even ROAS; cover them with the profit share in the target ROAS.
Frequently asked questions
How do you calculate break-even ROAS?
1 ÷ contribution margin ratio. A 50% margin breaks even at 2x; 25% at 4x; 20% at 5x.
What is break-even ROAS in percent?
Multiply by 100: 2x is 200%. Google Ads Target ROAS uses the percentage.
What is the break-even ROAS for a 30% margin?
1 ÷ 0.30 = 3.33x (333%).
What is break-even CPA?
Price minus variable costs per order: the most a sale can cost in ads before it loses money. For the $60 example it is $30.