What is break-even ROAS? The profit line explained
Break-even ROAS is the lowest return on ad spend a campaign can deliver without losing money on the orders it drives. Here is what it means, how it is calculated, a worked example and how it relates to target ROAS and POAS.
Break-even ROAS is the lowest return on ad spend a campaign can deliver without losing money on the orders it drives. At break-even, the margin left from ad-driven sales exactly pays for the ads. Above it, the campaign makes a contribution profit. Below it, every sale costs more in ads than it earns.
How do you calculate break-even ROAS?
Divide 1 by your contribution margin: the share of each sale, net of VAT, that is left after cost of goods, shipping, payment fees and returns.
| Contribution margin | Break-even ROAS |
|---|---|
| 25% | 4.0 |
| 40% | 2.5 |
| 50% | 2.0 |
| 60% | 1.67 |
Fixed costs such as salaries and software stay out, because the profit above break-even is what pays for them. Our break-even ROAS formula guide lists which costs to include, with VAT examples for the UK, UAE, Saudi Arabia and Qatar.
Break-even ROAS example
Illustrative numbers for a Saudi skincare brand, net of VAT:
- Average order: SAR 300.
- Variable costs: product SAR 120, delivery and packaging SAR 30, payment and cash-on-delivery fees SAR 12, returns allowance SAR 18. Total SAR 180.
- Contribution: SAR 120, a 40% margin.
- Break-even ROAS: 1 ÷ 0.40 = 2.5.
A campaign reporting ROAS 3.2 is profitable on its orders. One at 2.1 loses about SAR 0.16 for every SAR 1 of ad spend.
What is a good break-even ROAS?
A lower one, because it means more margin per sale and more room for ads to work. It describes your business model rather than a target to hit. You lower it by raising prices or order value, or by cutting product, shipping and return costs. Discounts raise it, because a promotion cuts net revenue while most costs stay the same.
Break-even ROAS vs target ROAS
Break-even is the floor. Target ROAS sits above it by the profit you want to keep: 1 ÷ (contribution margin − target profit margin). With a 40% margin and a 10% profit goal, the target is 1 ÷ 0.30 = 3.33. POAS states the same idea in profit terms, with break-even always at 1.0.
How Grower helps
The DTC ecommerce page includes a break-even ROAS calculator, and Grower's channels leaderboard ranks every connected channel by ROAS, so you can compare each one with your line.
Frequently asked questions
What does a break-even ROAS of 2 mean?
It means half of each sale is left after variable costs, a 50% contribution margin. Every AED 1 of ads must bring in AED 2 of net revenue just to cover itself. A campaign at ROAS 2 makes no contribution profit, and anything above 2 adds profit that goes toward fixed costs and growth.
Should I stop campaigns below break-even ROAS?
Not automatically. Prospecting campaigns often look below break-even on first orders but win customers who buy again. If a new customer's 12-month contribution is double their first order, the first-order break-even halves. Check repeat value and attribution before cutting, and judge retargeting more strictly than prospecting.
Does break-even ROAS change during sales?
Yes. A discount cuts net revenue while product and shipping costs stay the same, so margin falls and break-even ROAS rises. A 20% sitewide discount on a product with a 40% margin drops the margin to 25% and pushes break-even from 2.5 to 4.0. Recalculate before every sale event, including White Friday and Ramadan.
Work out your own line in a minute with the free break-even ROAS calculator.