Break-even ROAS calculator
Product, shipping, packaging and payment fees for one order.
Break-even ROAS
2.50x
- Gross margin
- 40.0%
- Most you can pay in ads per sale
- $24.00
The formula
Gross margin = (price − cost per sale) ÷ price
Break-even ROAS = 1 ÷ gross margin
Break-even cost per sale = price − cost per sale
Break-even ROAS is the line every campaign is judged against. ROAS on its own (revenue ÷ ad spend) looks the same for a business with a 70% margin and one with a 20% margin, but those two need very different numbers to make money: 1.43x and 5x.
The third line is the same idea in dollars: the most one sale can cost you in ads before it starts losing money. It is often easier to plan with, because Meta reports cost per purchase directly.
A worked example
A skincare brand sells a serum for $60. Making, packing and shipping one order, plus the card fee, costs $36.
| Calculation | Result | |
|---|---|---|
| Gross margin | (60 − 36) ÷ 60 | 40% |
| Break-even ROAS | 1 ÷ 0.40 | 2.5x |
| Most you can pay in ads per sale | 60 − 36 | $24 |
So any campaign with a ROAS above 2.5x, or a cost per purchase under $24, makes money on the first order. If the brand offers free shipping that costs it $6 an order, the cost per sale becomes $42, the margin drops to 30%, and break-even ROAS rises to 3.33x. A small change in costs moves the target a lot, which is why it is worth recalculating whenever prices, shipping or discounts change.
How to use the result
- Set the target before the campaign. Write down the break-even ROAS and aim comfortably above it, since ad results move from week to week.
- Compare with your actual ROAS. Plug last month's revenue and spend into the ROAS calculator to see which side of the line you are on.
- Use the dollar version for cost per purchase. If Meta reports $19 per purchase and your break-even is $24, each sale earns about $5 after ads. The CPA calculator does this check for any conversion.
- Plan the budget around it. Once you know what a sale may cost, the Facebook ads budget calculator turns a monthly sales target into a daily budget.
Many businesses accept a first order at or below break-even because customers buy again. If you know your repeat rate, multiply the margin by the expected number of orders per customer to get a lifetime break-even, which will be lower. For context on typical returns, see what a good ROAS is for Meta ads.
Common mistakes
Using the list price instead of what customers actually pay. If most orders use a 15% discount code, the real price is 15% lower and break-even ROAS is higher than the list price suggests. Use the average order value from your store for the last month.
Leaving out payment and marketplace fees. Card processing commonly takes a few percent of each order, and marketplaces take more. On a 30% margin product, a 3% fee is a tenth of your margin, enough to move break-even from 3.33x to 3.7x.
Comparing one product's break-even with a store-wide ROAS. A campaign that sells a mix of products has a blended margin. Work out break-even for the mix you actually sell through ads, not your best-margin product.
Treating break-even as the goal. It is the floor. Leave room for the weeks when costs rise, and for the fixed costs the number does not include.
Limits
Break-even ROAS only covers the cost of each sale. It ignores fixed costs (salaries, software, rent), so a campaign just above break-even still needs volume to cover them. Returns and refunds lower the real margin; if 10% of orders come back, use a margin that reflects that. And discounts change the price, not the cost, so a 20%-off promotion can push break-even much higher than people expect.