Short answer
Break-even ROAS = price ÷ (price − variable costs) = 1 ÷ contribution margin; break-even ACoS = contribution margin ÷ price. A 40% margin gives ROAS 2.50 and ACoS 40%; for a 10% profit the needed ROAS is 1 ÷ 0.30 = 3.33.
1. The formulas
- Break-even ROAS = price ÷ (price − variable costs)
- Same thing: 1 ÷ contribution margin
- Break-even ACoS = contribution margin ÷ price = 1 ÷ break-even ROAS
- Target ROAS for a profit = 1 ÷ (contribution margin − target profit %)
2. Worked examples
| Example | Contribution margin | Break-even ROAS | Break-even ACoS |
|---|---|---|---|
| $65 price, $24.50 costs | 62.3% | 1.60 | 62.3% |
| $30 price, $10 costs | 66.7% | 1.50 | 66.7% |
3. Break-even ROAS by margin
| Contribution margin | Break-even ROAS |
|---|---|
| 20% | 5.00 |
| 25% | 4.00 |
| 30% | 3.33 |
| 40% | 2.50 |
| 50% | 2.00 |
| 60% | 1.67 |
| 75% | 1.33 |
4. Aiming for a profit
With a 40% margin and a 10% profit target, the ROAS you need is 1 ÷ (0.40 − 0.10) = 3.33. For the $65 example with a 62.3% margin and a 15% profit target it is 1 ÷ (0.623 − 0.15) = 2.11.
5. What break-even ROAS leaves out
- It counts variable costs only, so fixed costs are not covered at break-even ROAS.
- Returns, discounts and VAT should be in the price and cost you use.
- Repeat purchases can justify a lower first-order ROAS, but only if they really happen.
To see how many units you need to cover fixed costs, use the Break-Even Calculator.
6. Frequently asked questions
What is break-even ROAS?expand_more
The return on ad spend at which an ad earns back exactly its cost, calculated as price ÷ (price − variable costs).
How is ROAS different from ACoS?expand_more
ROAS is revenue ÷ ad spend and ACoS is ad spend ÷ revenue, so ACoS = 1 ÷ ROAS.
What ROAS do I need to be profitable?expand_more
Anything above break-even ROAS. To hit a target profit margin, use 1 ÷ (contribution margin − target profit %).
Does break-even ROAS include fixed costs?expand_more
No. It only covers variable costs, so use unit break-even as well to cover fixed costs.