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Glossary · Metrics

What is Break-even ROAS?

Definition

Break-even ROAS is the return on ad spend at which a campaign covers its costs exactly, calculated as 1 divided by gross margin. At a 50% gross margin break-even is 2.0x, at 40% it is 2.5x, and at 25% it is 4.0x. Any campaign running below its break-even ROAS is losing money regardless of how the figure looks in the ads dashboard.

How it is calculated

Break-even ROAS = 1 ÷ Gross margin

What to know

Gross margin here should include everything that scales per order: product cost, packaging, shipping and payment processing. Leaving those out produces a break-even number that is wrong in the optimistic direction.

Because it is a ratio, break-even ROAS is awkward to act on inside a campaign. The same fact expressed as maximum CPA, which is gross profit per order, is usually easier to manage against.

Related terms

ROASROAS (return on ad spend) is the revenue generated by advertising divided by the amount spent on it. A campaig...CPACPA (cost per acquisition) is ad spend divided by the number of conversions. Spending $2,000 to generate 50 co...AOVAOV (average order value) is total revenue divided by number of orders. $48,000 across 600 orders is an AOV of...

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