Why break-even ROAS is the number that matters
Ad platforms report ROAS, and it's easy to celebrate a 3× or panic at a 1.8× — but those numbers are meaningless without context. A 3× ROAS loses money if your costs mean you break even at 3.5×, and a 2× is pure profit if you break even at 1.5×. The only ROAS that tells you anything is yours, and it's set entirely by your unit economics.
What this calculator includes
Contribution margin here is what's left of the selling price after four real costs:
- COGS — the landed cost of the product itself.
- Payment fees — percentage plus the fixed per-transaction fee, which bites hardest on small tickets. Model your exact blended rate in the Stripe True Fee Calculator.
- Shipping you absorb — the part of fulfilment you don't pass to the customer.
- Returns — a returned order refunds the revenue but leaves the variable costs sunk, so a higher return rate quietly lowers the margin on every order.
A worked example
Sell at $50 with $15 COGS, a 2.9% + $0.30 payment fee, $4 of absorbed shipping, and a 5% return rate. Payment fee is about $1.75; variable cost is roughly $20.75. After returns, expected contribution is about $26 — a ~51% margin — so break-even ROAS lands near 1.9× and your max CAC is about $26. That means a campaign running at a 2.5× ROAS is genuinely profitable, while one at 1.5× is burning money even though the dashboard shows "sales."
How to use it
Treat your break-even ROAS as a hard floor, not a target — your real goal sits comfortably above it to fund overhead and profit. When a channel drifts toward break-even, the fastest levers are usually on the cost side (returns, COGS, shipping) rather than the ad side. For the full picture of where ecommerce margin leaks, read the ecommerce profit playbook.
Frequently asked questions
What is break-even ROAS?
Break-even ROAS is the return on ad spend at which an order makes exactly zero profit — every cost is covered, but nothing is left over. Above it, the order is profitable; below it, you're paying to lose money. It's the single most important number for deciding whether a paid campaign actually works.
How do you calculate break-even ROAS?
Break-even ROAS = selling price ÷ contribution margin per order. Contribution margin is what's left of the price after COGS, payment fees (percentage + fixed), shipping you absorb, and the cost of returns. If your contribution margin is 40% of the price, your break-even ROAS is 2.5 — you must earn $2.50 in revenue per $1 of ad spend just to break even.
What is a good ROAS?
There's no universal 'good' ROAS — it's entirely relative to your break-even. A ROAS of 3 is excellent if you break even at 2, and a disaster if you break even at 4. Generic benchmarks are useless precisely because they ignore your margin. Calculate your own break-even first; that's the only number that tells you whether a campaign is profitable.
Why include returns in the calculation?
Because a return is not a neutral undo. When an order comes back you refund the revenue but the variable costs — product, outbound shipping, and often the payment fee — are already spent. Ignoring returns makes your margin look healthier than it is and sets your ad-spend ceiling too high, which is how stores quietly scale into losses.
What's the difference between break-even ROAS and max CAC?
They're two views of the same limit. Max CAC (cost of acquiring a customer) is the most you can pay in ad spend to win one order and still break even — it equals your contribution margin in dollars. Break-even ROAS expresses that same ceiling as a ratio of revenue to ad spend. Use whichever your ad platform reports against.
Independent analysis, not financial advice. Estimates use a standard contribution-margin model; validate against your own accounting.