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Break-even ROAS: how to calculate it (and set a target ROAS)

Learn how break-even ROAS works using contribution margin, what to include in the model, and how to turn it into a realistic target ROAS.

Updated 2026-02-16

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Break-even ROAS Calculator
Example (60% margin; 3% fees; 0% shipping; 0% returns)
A common baseline for digital goods or light fulfillment costs.

Definition

Break-even ROAS is the minimum ROAS needed so your variable contribution profit is not negative. It's a floor, not a growth target.

Contribution margin model

Contribution margin ~= gross margin - payment fees - shipping/fulfillment - returns/refunds (all as % of revenue).

Formula

Break-even ROAS = 1 / contribution margin.

How to calculate break-even ROAS (step-by-step)

  • Estimate contribution margin as a percent of revenue.
  • Convert it to a decimal (e.g., 40% -> 0.40).
  • Compute 1 / contribution margin to get break-even ROAS.

Break-even ROAS example

If contribution margin is 40%, break-even ROAS = 1 / 0.40 = 2.5.

What to include (practical)

  • Include costs that scale with revenue (fees, fulfillment, returns).
  • Do not include fixed costs here; handle them by setting a higher target ROAS.
  • Keep assumptions consistent across campaigns so comparisons are fair.

Turning break-even into a target ROAS

  • Add a buffer for fixed costs and desired profit (e.g., 20-50% above break-even).
  • Use different targets per channel based on volatility and scalability.
  • Validate with incrementality tests as spend scales.

FAQ

Why does my break-even ROAS look too high-
It usually means contribution margin is low after fees/shipping/returns. Double-check gross margin and whether you are double-counting costs.
Should I use break-even ROAS for subscription businesses-
For subscriptions, break-even ROAS on first purchase can be misleading. Consider CAC, payback period, and LTV instead, or model break-even on contribution profit over time.

More in paid ads

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Paid ads measurement hub: ROAS, MER, marginal ROAS, and incrementality
A practical hub for paid ads measurement: connect ROAS to profit, use MER for top-down truth, watch marginal ROAS for scale, and validate incrementality with holdouts.
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