You can't scale paid media profitably until you know the exact ROAS where you break even. Enter your numbers below to find yours — plus your gross and contribution margins, max CPA, and the target ROAS you need to hit your profit goal.
Your unit economics
Free delivery comes straight out of your margin — the full $7.00 counts against every order.
Estimates for planning, not accounting. Breakeven runs off contribution margin — every variable cost, including the shipping you absorb. Fixed overhead like salaries and rent isn't included, so hold a little extra margin above breakeven.
Breakeven ROAS is just the inverse of your gross margin. Three steps get you there — the calculator above does them live, but here's exactly what it's doing.
Start with your average order value, then subtract every variable cost of fulfilling that order: landed COGS, pick and pack, the outbound shipping you absorb, payment-processing fees, and returns. Outbound shipping the customer pays for at checkout washes out against the shipping revenue, so leave that at zero — and keep inbound freight in COGS, where it belongs. What's left is your contribution profit — the margin an ad has to earn back.
Divide contribution profit by average order value. Sell for $70 and keep $35.90 after costs and your contribution margin is 0.51, or 51%. Note that isn't your gross margin — that's 70%, revenue less COGS. Contribution is the one that drives how hard your ads have to work.
Breakeven ROAS is simply 1 ÷ contribution margin. A 51% contribution margin means you break even at 1.95× — for every $1 of ad spend you need $1.95 back before you start making money. Lower margins push that number up fast.
Worked example: a $70 order with $21 COGS, $4 pick and pack, $7 of shipping you cover, and 3% fees ($2.10) leaves $35.90 of contribution — a 51% contribution margin. Breakeven ROAS = 1 ÷ 0.513 = 1.95×. Below 1.95× that ad loses money; above it, every extra 0.1× is profit. Charge that $7 at checkout instead of eating it and contribution rises to $42.90 — breakeven falls to 1.63×.
Scaling ad spend multiplies whatever your unit economics already are. If each order quietly loses money, spending more just loses it faster — and platform dashboards full of impressions and clicks will never tell you. Breakeven ROAS is the line between growth and a slow bleed. Know it first, hold every campaign against it, then pour fuel on the ones clearing it with room to spare.
Three numbers get thrown around interchangeably and cost brands real money. Here's how they actually relate.
The return on ad spend where ad-driven revenue exactly covers your product costs and the ad spend itself. One dollar below it and every sale loses money. It's the floor you have to clear before scaling means anything.
Breakeven plus the profit margin you actually want to keep. If you break even at 1.8× and want a 20% net margin, your target ROAS is higher. This is the number your campaigns should be optimized toward — not breakeven.
Meta reports ROAS on attributed conversions inside its own window, and it counts revenue, not profit. Your true, blended ROAS (MER) is usually lower. Always hold Meta's number against a breakeven you calculated from real margins.
Breakeven ROAS is the return on ad spend at which your ad revenue exactly covers both your cost of goods and the ad spend that generated the sale — you make zero profit and zero loss. Any ROAS above it is profit; anything below it means you lose money on every order. It is the single number you must know before scaling paid media.
Breakeven ROAS = 1 ÷ contribution margin. First find contribution margin as a decimal: (average order value − COGS − pick and pack − the shipping you absorb − transaction fees − returns) ÷ average order value. Then divide 1 by that number. A 50% contribution margin gives a breakeven ROAS of 2.0×; a 40% margin gives 2.5×.
Contribution margin. Gross margin is the accounting definition — revenue less cost of goods only — and fulfillment costs like pick and pack and shipping sit below that line. Breakeven ROAS asks a different question: after every variable cost, how much is left to pay for ads? That is contribution margin. A brand can have a 70% gross margin and a 51% contribution margin, and using the wrong one puts breakeven at 1.43× when it is really 1.95×.
No. If the customer covers shipping at checkout, the shipping revenue offsets the carrier cost and the two wash out, so it should not drag your breakeven down. Count it only when you absorb it. If you cover part of it — a flat rate below what delivery actually costs, or free shipping over a threshold — enter just the portion you absorb and treat that as free shipping. Two things to keep separate: this is outbound shipping only, warehouse to customer. Inbound freight from your manufacturer belongs in landed COGS, not here. And pick and pack is a cost on every order no matter who pays for delivery, so it always counts.
Breakeven ROAS is where you stop losing money. Target ROAS is breakeven plus the profit margin you want to keep, so it's always higher. You calculate breakeven from your margins, then set your target above it based on your profit goals and how aggressively you want to scale.
ROAS itself is revenue divided by ad spend, so it's a revenue metric. That's exactly why breakeven ROAS matters: it translates your profit margin into the revenue-based ROAS number your ad platform reports, so you can tell at a glance whether a campaign is actually making money.
Meta attributes conversions inside its own click and view window and counts total revenue, so it tends to over-report versus your blended, all-channel ROAS (MER). Treat platform ROAS as directional. Judge profitability by comparing your true blended ROAS against a breakeven you calculated from real margins.
There's no universal 'good' ROAS — it depends entirely on your margins. A brand with an 80% gross margin can be highly profitable at 1.5×, while a brand at 25% margin loses money until 4×. A 'good' ROAS is any ROAS comfortably above your breakeven, with enough headroom for the profit you want to keep.
Knowing your breakeven ROAS is step one. Clearing it, ad after ad, is what we do. Ise AI builds profitable Meta creative from real winning-ad data — and our performance fee doesn't kick in until we've launched an ad that beats your breakeven.