Ad ROI CalculatorHow to calculate break-even ROAS
Break-even ROAS = 1 ÷ Gross marginGross margin is the share of revenue you keep after paying for the goods: (revenue − cost of goods) ÷ revenue. If you sell a product for 100 and it costs you 60, your margin is 40% and your break-even ROAS is 1 ÷ 0.4 = 2.5.
Why it works: at a ROAS of 2.5, 1,000 of ad spend brings 2,500 in revenue. 40% of that is 1,000 in gross profit, exactly what the ads cost. Above 2.5 you make money; below it you pay to sell.
Break-even ROAS by margin
| Gross margin | Break-even ROAS | Break-even ACOS |
|---|---|---|
| 20% | 5.00× | 20% |
| 25% | 4.00× | 25% |
| 30% | 3.33× | 30% |
| 40% | 2.50× | 40% |
| 50% | 2.00× | 50% |
| 60% | 1.67× | 60% |
| 75% | 1.33× | 75% |
Example: a campaign that looks fine but barely earns
A campaign spent 1,000 and brought 3,000 in revenue: a ROAS of 3. With a 40% margin, gross profit is 3,000 × 40% = 1,200. After the 1,000 in ad spend, 200 is left. The ROAS of 3 is above the 2.5 break-even, but not by much. At a 30% margin, the same campaign would lose 100.
FAQ
How do you calculate break-even ROAS?
Divide 1 by your gross margin. With a 40% gross margin, break-even ROAS is 1 ÷ 0.4 = 2.5. At that ROAS the gross profit from sales exactly covers the ad spend.
What is break-even ACOS?
Break-even ACOS equals your gross margin. With a 40% margin you break even when ad spend is 40% of revenue, which is the same point as a ROAS of 2.5.
What should I include in gross margin?
Everything you pay per sale apart from the ads: cost of goods, and if they apply to you, shipping, payment fees, marketplace fees and the average cost of returns. The more you include, the more accurate the break-even ROAS.
Is a ROAS above break-even always good?
It means the ads pay for themselves on the first sale. Whether that is enough depends on your fixed costs and goals. If customers buy again, you may accept a ROAS below break-even on the first order and earn the profit later; that is what LTV is for.