Break-Even ROAS (Return On Ad Spend) is the minimum revenue per dollar of ad spend that keeps you from losing money, the point where ad revenue exactly covers your product and direct costs (so profit = 0). Knowing this number tells you the target ROAS your campaigns must hit to avoid bleeding cash and helps you set realistic CPA/CTR/CPC benchmarks.

Why this metric matters

If you run paid ads, ROAS is the single most practical performance readout: it translates ad spend into revenue. But raw ROAS doesn’t automatically mean profit only when you compare ROAS to your break-even ROAS do you know whether a campaign is actually profitable. Use this calculator to turn vague intuition into a concrete threshold for each product or campaign.

The formulas

Method A (profit margin approach)

Break-Even ROAS = Selling Price / (Selling Price − Product Cost)
(That denominator is your per-unit gross profit.)

Method B (net profit margin / reciprocal)

Break-Even ROAS = 1 / (Average Net Profit Margin)
(Where Net Profit Margin = (Selling Price − Product Cost) / Selling Price.)

How to use this calculator

1. Enter Product Selling Price – the amount the customer pays (exclude taxes if you track them separately).
2. Enter Product Cost – cost of goods sold (COGS), i.e., the cost to buy/manufacture that unit.

What to include in “Product Cost”

• Manufacturing or wholesale cost (COGS).
• Typical fulfilment/shipping paid by seller (if you don’t pass it to the customer).
• Payment processing fees (a rough per-order average).
• Refunds/returns provisioning (estimate per sale).
  Exclude fixed overheads you’re not allocating per unit (rent, salaried staff) unless you want a target that ensures net profit after overhead in which case add an allocated per-order overhead number.

Examples

1. Selling price $50, product cost $20 → profit per unit = $30. Break-Even ROAS = 50 / 30 = 1.67.
   That means you can spend up to about $30 in ads to acquire $50 revenue and still break even (ROAS 1.67).
2. Selling price $25, product cost $25 → profit = $0. Break-Even ROAS = ∞ (you cannot profit from ads at this price).
3. Selling price $40, product cost $45 → negative profit → product loses money regardless of ad efficiency; either raise price or lower cost.

Multi-product stores

If you sell many SKUs at different margins, compute an average order value (AOV) and an average cost of goods sold per order, then use those averages in the formula. This gives a practical store-level break-even ROAS to guide campaign targets but remember high-margin winners and low-margin items may need product-level targets.

How to interpret the result in your ad platforms

• If your campaign ROAS > Break-Even ROAS → campaign is profitable on gross margin.
• If your campaign ROAS ≈ Break-Even ROAS → you’re at breakeven; consider overheads and reinvestment needs before scaling.
• If your campaign ROAS < Break-Even ROAS → you’re losing money on ad spend and should pause/optimize.

Use platform ROAS reporting (Facebook/Google/TikTok) to compare reported ROAS to your break-even target; adjust for attribution windows (28d, 7d click etc.) so you compare apples to apples.

Practical tips to act on the number

• Set CPA targets: convert Break-Even ROAS into a target CPA (Target CPA = AOV / Break-Even ROAS) to bid prudently.
• Segment by funnel: top-of-funnel audiences usually have lower ROAS expect that and optimize for LTV rather than immediate breakeven.
• Protect margins: build a safety buffer (e.g., aim a little higher than break-even to cover variable fees and returns).
• Test price and COGS: small price increases or cost reductions can materially lower break-even ROAS and unlock profitable scaling.

Common mistakes (avoid these)

• Using sticker price but forgetting shipping or processing fees. That underestimates costs.
• Relying on a single SKU’s margin for a mixed cart store. Use AOV & average COGS where appropriate.
• Comparing inconsistent attribution windows. Ensure the ROAS time window in ads manager matches how you measure revenue.
• Ignoring returns. If your niche has high return rates, add a per-order return provisioning.

FAQs

Q1. Is a higher break-even ROAS better?
A: No, a higher break-even ROAS means you need more revenue per dollar spent to not lose money, which usually means lower margin. Lower break-even ROAS is better because it’s easier for ads to be profitable.

Q2. Should I use break-even ROAS or target ROAS to scale?
A: Use break-even ROAS to understand the minimum threshold. For scaling, set a target ROAS above break-even to ensure profit after overheads and reinvestment.

Q3. Can ad platforms report exact ROAS?
A: Platforms report revenue attributed to ads using their attribution windows; those numbers can differ from your backend revenue. Reconcile reports regularly.

Sources: EcomVivid, AAM Funnel, Dropship.io, BreakEvenROASCalculator.com, Viral Ecom Adz, TrendTrack, Digital Time Savers.