Analytics

Break-Even ROAS: How to Calculate It and Why It Matters

Learn how to calculate break-even ROAS and break-even CPA for your ecommerce store, with worked examples and how to use them to make ad decisions.

Key takeaways
  • ROAS only means something compared to your break-even point.
  • Include every variable cost, not just product cost.
  • Use break-even CPA to judge campaigns quickly.

Return on ad spend (ROAS) is revenue divided by ad spend. A ROAS of 3 means you earned $3 in revenue for every $1 spent. But whether a ROAS of 3 is good depends entirely on your margins. That is why every store needs a break-even ROAS.

The formula

Break-even ROAS = Average order value ÷ (Average order value − Variable costs per order)

Variable costs include product cost, shipping, packaging, payment processing fees, platform fees and an allowance for returns.

Worked example

Average order value$60
Product cost$18
Shipping and packaging$7
Payment and app fees$3
Returns allowance$2
Total variable costs$30
Contribution before ads$30
Break-even ROAS60 ÷ 30 = 2.0

In this example, any ROAS above 2.0 makes money on the first order; anything below 2.0 loses money unless customers buy again.

Break-even CPA

Break-even cost per acquisition equals your contribution before ads — $30 in the example above. If a campaign is acquiring customers for $25, it is profitable on the first order.

Adding customer lifetime value

If customers reliably buy again, you can afford to acquire them below break-even on the first order. Only do this when you have real repeat-purchase data, not assumptions.

Use MER for the big picture

Marketing efficiency ratio (MER) is total revenue divided by total marketing spend. It avoids attribution arguments between platforms and shows whether the business as a whole is growing profitably.


This article is for general information only. See our Disclaimer.

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