Break-even ROAS: how to calculate it (and set a target ROAS)

Learn how break-even ROAS works using contribution margin, what to include in the model, and how to turn it into a realistic target ROAS.

Updated 2026-01-05

Try it in a calculator

Break-even ROAS Calculator

Example (60% margin; 3% fees; 0% shipping; 0% returns)

A common baseline for digital goods or light fulfillment costs.

Definition

Break-even ROAS is the minimum ROAS needed so your variable contribution profit is not negative. It's a floor, not a growth target.

Contribution margin model

Contribution margin ~= gross margin - payment fees - shipping/fulfillment - returns/refunds (all as % of revenue).

Formula

Break-even ROAS = 1 / contribution margin.

What to include (practical)

Include costs that scale with revenue (fees, fulfillment, returns).
Do not include fixed costs here; handle them by setting a higher target ROAS.
Keep assumptions consistent across campaigns so comparisons are fair.

Turning break-even into a target ROAS

Add a buffer for fixed costs and desired profit (e.g., 20-50% above break-even).
Use different targets per channel based on volatility and scalability.
Validate with incrementality tests as spend scales.

FAQ

Why does my break-even ROAS look too high?

It usually means contribution margin is low after fees/shipping/returns. Double-check gross margin and whether you are double-counting costs.

Should I use break-even ROAS for subscription businesses?

For subscriptions, break-even ROAS on first purchase can be misleading. Consider CAC, payback period, and LTV instead, or model break-even on contribution profit over time.

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