Break-Even ROAS Calculator

What is break-even ROAS?

Break-even ROAS is the return on ad spend at which the contribution generated by your advertising exactly covers the advertising cost. At the break-even point there is no advertising profit and no advertising loss.

A campaign performing above its break-even ROAS has room to generate profit. A campaign performing below it is not generating enough contribution to cover its advertising spend, assuming the margin entered includes all relevant variable costs.

Break-even ROAS formula

The contribution margin must be converted from a percentage to a decimal before using the formula. For example, a 40% contribution margin becomes 0.40.

A 40% margin therefore gives:

This means the business needs 2.50 in revenue for every 1.00 spent on advertising to reach its break-even point.

Which margin should you use?

For a more useful break-even ROAS calculation, use the contribution margin available before advertising rather than simply using revenue minus the purchase cost of the product.

Depending on the business, relevant variable costs may include cost of goods sold, shipping, packaging, fulfilment, payment processing fees and other costs that increase when an additional sale is made.

If these costs are excluded, the margin may appear higher than it really is and the calculated break-even ROAS may be too low.

How to calculate contribution margin

Contribution margin is the amount of revenue remaining after variable costs are deducted. For break-even ROAS, use the contribution available before advertising costs are deducted.

For example, if a business receives 100 in revenue and incurs 60 in variable costs before advertising, the contribution is 40 and the contribution margin is 40%.

Depending on the business, variable costs may include cost of goods sold, shipping, packaging, fulfilment, payment processing fees, sales commissions and other costs that increase when an additional sale is made.

If relevant variable costs are excluded, the contribution margin may appear higher than it really is and the calculated break-even ROAS may be too low.

For more information about contribution margin and variable costs, see Shopify's guide to contribution margin .

Break-even ROAS example

Suppose a business generates 100 in sales and has 60 in variable costs before advertising. That leaves 40, giving a contribution margin of 40%.

At a 2.50× ROAS, every 1 spent on advertising generates 2.50 in revenue. A 40% contribution margin on 2.50 is 1.00, which exactly covers the advertising cost.

Does break-even ROAS mean the business is profitable?

Not necessarily. The break-even ROAS calculated here is the point at which the contribution from attributed sales covers the advertising spend, based on the contribution margin entered.

A business may still have fixed and other costs to cover, such as rent, salaries, software, insurance and administration. Reaching the calculated break-even ROAS therefore does not necessarily mean that the business as a whole has reached its accounting break-even point.

A business that wants advertising to contribute towards fixed costs and profit would normally require performance above this advertising break-even threshold.

Break-even ROAS at different margins

Lower-margin businesses require a higher ROAS to break even because a smaller proportion of each sale is available to pay for advertising.

ROAS and break-even ROAS

Standard ROAS measures the revenue attributed to advertising divided by advertising spend. For example, 3,000 in attributed revenue from 1,000 of advertising spend produces a ROAS of 3.00×.

ROAS alone does not show whether that campaign is profitable. The same 3.00× ROAS could be above break-even for a high-margin business and below break-even for a low-margin business.

The optional Current ROAS field in the calculator lets you compare a campaign's reported ROAS directly with the break-even ROAS calculated from your margin.

ROAS vs ROI

ROAS and return on investment (ROI) measure different things. ROAS compares attributed advertising revenue with advertising spend, while ROI considers profit in relation to the costs involved.

This is why a high ROAS does not automatically mean a campaign or business is highly profitable. Product costs, fulfilment, transaction fees and other expenses can substantially reduce the financial return from the revenue generated.

Frequently asked questions