What ROAS do I need to break even?

Break-even ROAS = 1 ÷ contribution margin ratio. If each sale leaves 60% of revenue before advertising, your break-even return on ad spend is 1.67x, or about 166.7%.

That means $1 of advertising needs to bring in about $1.67 in revenue to cover the variable costs and the ads. Fixed overhead still needs paying.

The break-even ROAS calculator works this out from your selling price and variable cost. Let’s use an illustrative $80 product to see where the threshold comes from.

Calculate the margin before ads

Suppose a product sells for $80 and has $32 in variable costs, excluding advertising.

The contribution per sale is $80 − $32 = $48. Divide $48 by $80 and you get a 60% contribution margin.

The site’s contribution margin calculator uses this price-minus-variable-cost approach. The worked contribution margin guide explains which costs belong in it.

At break-even, advertising uses that entire $48. So $80 in revenue divided by $48 in allowable ad spend gives 1.6667x ROAS.

Use the unrounded ratio in your calculations. The displayed 1.67x is rounded.

Why does the calculator show ROAS as a percentage?

Google Ads defines ROAS as conversion value divided by advertising spend and expresses its target as a percentage. In this calculator, conversion value is revenue: units sold multiplied by price.

A 2x return is 200%. A 3.2x return is 320%. Both formats describe the same ratio.

With 200 units sold at $80, revenue is $16,000. If advertising costs $5,000, actual ROAS is $16,000 ÷ $5,000 = 3.2x, or 320%.

Those units cost $6,400 before advertising. Subtract that and the $5,000 ad bill from revenue, and $4,600 remains before fixed costs and other excluded expenses. The calculator labels this amount “Profit after ads.”

For the ratio to describe a campaign, use revenue attributed to that campaign and its matching spend. Mixing all store sales with one campaign’s ad bill can overstate its return. Keep the reporting period and attribution method consistent.

Is a 2x ROAS good?

It depends on the margin available to pay for the ads.

Here we keep the price at $80 and change the variable cost. A $32 cost leaves a 60% margin. A $48 cost leaves 40%. A $60 cost leaves 25%.

At 2x ROAS, ads consume half the revenue. The product with a 60% margin has 10% of revenue left after ads. The product with a 40% margin loses 10% of revenue before fixed costs.

Try the narrower margin with the same sales and ad spend:

Its actual ROAS stays at 320%, but break-even rises to 250%. The amount left after ads falls to $1,400.

What should I include in variable cost?

Include costs that grow with each sale, using a consistent per-unit estimate. Depending on the business, that can include the product, packaging, payment fees and shipping you cover.

Account for discounts and returns in the revenue or cost assumptions without counting them twice. Advertising stays outside variable cost here because the formula calculates how much margin it can consume.

A product with no positive contribution margin has no finite break-even ROAS in this model. More sales cannot cover advertising when every sale already loses money before ads.

What about overhead and a profit target?

The reciprocal formula covers variable costs and advertising. To include a fixed-cost amount for a period, subtract it from the period’s contribution before deciding what you can spend on ads.

For the 200-unit example, contribution before ads is $9,600. If you allocate $2,000 to fixed overhead and want $1,000 left afterward, allowable advertising is $6,600. Revenue of $16,000 divided by $6,600 gives a required ROAS of about 2.42x, or 242.4%.

That is a separate planning calculation; the calculator’s main break-even result excludes that overhead and target. All figures here are illustrative estimates, not a recommendation for your advertising budget. Enter your own costs in the ROAS calculator and compare the result with the return your campaigns actually deliver.