Break-Even ROAS Calculator
Your break-even ROAS is 1 divided by your gross margin. Below that number your ads lose money no matter how good they look. Enter your margin to find yours.
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Result
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Formula
Break-even ROAS = 1 ÷ Gross margin
Worked example
At a 40% margin your break-even ROAS is 2.5 — you need $2.50 back for every $1 spent just to stand still. To keep 15% profit on top, you need a ROAS of 4.0.
What's a good number?
This is the one benchmark that is genuinely yours rather than an industry average. It falls straight out of your margin and nothing else. Print it, and judge every campaign against it. Most advertisers who feel their ads 'aren't working' have simply never calculated this number and are comparing themselves to benchmarks from businesses with completely different economics.
Questions
- Should I use gross margin or net margin?
- Gross margin — revenue minus the direct cost of delivering the product or service. Ad spend is what you are testing against, so it must not be inside the margin figure or you will double-count it.
- My margin is 20%. Is advertising hopeless?
- Not hopeless, but demanding: you need a 5x ROAS to break even, which is difficult on cold traffic. Businesses in that position usually need repeat purchases or a high lifetime value to make paid acquisition work, so calculate lifetime value rather than first-order value.
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