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Target ROAS: how to set a realistic ROAS goal

A practical guide to target ROAS: use contribution margin and allocations for fixed costs and profit to set a ROAS goal that fits your business.

Updated 2026-01-05

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Target ROAS Calculator
Example (60% margin; 3% fees; 10% fixed; 10% profit)
A quick planning target that includes fixed costs and a profit buffer.

Break-even vs target ROAS

  • Break-even ROAS is the minimum ROAS to avoid losses on variable costs.
  • Target ROAS is higher: it should also cover fixed costs and desired profit (or a safety buffer).
  • Targets can vary by channel depending on volatility and scalability.

A simple planning model

Start from contribution margin (gross margin minus variable costs). Decide what percent of revenue must cover fixed costs and profit. The remainder is the maximum ad spend as a percent of revenue.

Formula

Target ROAS = 1 / (contribution margin - fixed allocation - desired profit).

How to choose allocations

  • Fixed cost allocation: total fixed costs / expected revenue for the same period (as a %).
  • Desired profit: your safety buffer or target profitability (as a %).
  • If the result is unrealistic, improve margin or reduce allocations rather than forcing a low ROAS target.

Use targets responsibly

  • Avoid changing definitions week-to-week; keep targets comparable.
  • Use incrementality tests when scaling spend to validate true impact.
  • Pair ROAS targets with CAC/payback for subscription businesses.

FAQ

Should I use a single target ROAS for all channels?
Not necessarily. Channels differ in volatility and intent. Many teams use different targets by channel while keeping the same definition of contribution margin.
What if my target ROAS is extremely high?
Your contribution margin may be low after fees/shipping/returns, or your fixed/profit allocations may be too high for current economics. Re-check assumptions first.

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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.
← ROI vs ROAS: definitions, formulas, and when to use each