marketing
Break-Even ROAS
The minimum ROAS where ad spend is exactly covered by contribution margin - below this, every sale costs you money.
Formula
Break-Even ROAS = 1 / Contribution Margin %
Break-even ROAS is the floor. If your contribution margin (after COGS, shipping, platform fees, but before ad spend) is 40%, your break-even ROAS is 2.5. At exactly 2.5x, ad revenue covers ad cost and leaves nothing. Below 2.5x, you are paying to lose money.
The formula inverts the contribution margin percentage. A 40% margin means you can afford to spend $0.40 of every revenue dollar on ads and still break even. $1 divided by $0.40 = 2.5x.
Break-even ROAS should be your minimum target for any campaign, not your goal. Your real ROAS target should be higher to cover overhead, owner pay and profit. Most DTC brands target 20-40% above their break-even ROAS.
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