How to calculate break-even ROAS for ecommerce

Break-even return on ad spend is the revenue you need per ad dollar to cover the costs you include in your calculation. Start with the contribution your orders leave before advertising, and document how your team defines net revenue.

Calculate contribution before ad spend

For an illustrative order with $100 in net revenue, subtract $35 in product costs, $12 in fulfillment and shipping subsidies, and $3 in payment fees. That leaves $50 in contribution before ads, or a 50% contribution margin. Break-even ROAS is 1 divided by the margin as a decimal. Here, 1 ÷ 0.50 gives 2.0×.

Include returns, discounts, and other variable costs consistently. A basket dominated by a low-margin product can have a different threshold from the store average. If margin is zero or negative, more ad revenue cannot produce break-even on this model.

Compare like with like

Check whether the platform reports gross or net revenue and whether the window includes returning customers. Compare acquisition cohorts at the same age and separate new-customer performance if acquisition is the goal. When repeat purchases matter, model them separately with observed cohort data.

Use the target in creative decisions

A concept can increase order volume while attracting buyers to a lower-margin offer. Track contribution alongside ROAS when deciding which ads to scale. The Meta Ads creative testing plan shows how to set up those comparisons before production starts.