How to Use This Calculator
Calculate your minimum profitable ROAS in under 60 seconds—before you spend a dollar on ads.
Enter Your Product Cost (COGS)
Input what you pay to acquire or make the product. Include manufacturing, wholesale cost, or materials—whatever you pay per unit.
Add Markup or Set Sale Price
Enter your markup percentage (e.g., 100% = doubling the cost) or directly enter your sale price. The calculator derives the other.
Use Ad Budget Planner (Optional)
Click "Show Advanced" to enter target revenue and ROAS goals. See required ad spend and expected profit for your campaign.
Read Your Break-Even ROAS
B-ROAS is your minimum profitable target. Any ROAS above this means profit; below means you're losing money on every ad-driven sale.
Pro Tip: After finding your B-ROAS, use the Reverse ROAS Calculator to plan your budget.
Why You Need to Calculate Break-Even ROAS Before Running Ads
Before spending a single dollar on advertising, every ecommerce business should answer one critical question:What's the minimum ROAS I need to break even? This number—your Break-Even ROAS (B-ROAS)—is the foundation of profitable advertising. Without it, you're flying blind.
Many businesses make the mistake of copying industry benchmarks or celebrating a "3x ROAS" without understanding whether that's actually profitable for their business. A 3x ROAS is excellent for a business with 50% margins but disastrous for one with 20% margins. The difference is understanding your product economics.
This calculator takes the opposite approach to traditional ROAS calculators. Instead of analyzing your ad performance after the fact, it helps you determine your target before you spend. By starting with your product costs and pricing, you'll know exactly what ROAS threshold you need to hit—and whether paid advertising is even viable for your business model.
What Is Break-Even ROAS? A Product-First Approach
Break-Even ROAS (B-ROAS) is the minimum Return on Ad Spend you need to achieve to cover your product costs and break even. Unlike standard ROAS which measures past performance, B-ROAS is aforward-looking metric based on your unit economics.
The Core Concept
B-ROAS tells you: "How much revenue do I need per dollar of ad spend just to not lose money?"
If your B-ROAS is 2.5x, you need to generate at least $2.50 in revenue for every $1 you spend on ads. Any ROAS above 2.5x is profit. Any ROAS below it is a loss.
Product Economics First
The calculation starts with your product costs—COGS, markup, and sale price. From these, we derive your profit per sale, which determines how much you can afford to spend on acquiring customers.
Your profit per sale is your maximum ad spend per unit. If you make $30 profit on a sale, spending more than $30 on ads for that sale means you're losing money.
This product-first approach is particularly powerful for businesses planning new product launches, evaluating pricing changes, or deciding whether to invest in paid advertising at all. Before you build a marketing budget, you need to know if your profit margins can support it.
How to Calculate Break-Even ROAS: Complete Formula Breakdown
Let's walk through each step of the B-ROAS calculation. Understanding these formulas will help you evaluate product viability and set realistic advertising targets.
Step 1: Calculate Total Cost
Your total cost includes COGS plus any additional markup costs (packaging, handling, overhead allocation).
Total Cost Formula
The complete cost to produce and prepare one unit for sale.
Total Cost = COGS + (COGS × Markup %)Step 2: Calculate Profit Per Sale
Your profit per sale is the maximum you can spend on ads for that unit and still break even.
Profit Per Sale Formula
The profit remaining after covering all product costs—this is your maximum ad budget per unit.
Profit Per Sale = Sale Price - Total CostStep 3: Calculate Break-Even ROAS
This is the key formula. It tells you how much revenue you need per dollar of profit.
Break-Even ROAS (B-ROAS) Formula
The minimum ROAS needed to cover costs. Your actual ROAS must exceed this to be profitable.
B-ROAS = Sale Price / Profit Per SaleUnderstanding the Result
A 1.857x B-ROAS means you need to generate at least €1.86 in revenue for every €1 in ad spend to break even. This is a very achievable target—most advertising platforms can deliver 2-4x ROAS for well-optimized campaigns. Products with B-ROAS under 3x are generally considered excellent candidates for paid advertising.
Alternative: Calculate from Profit Margin
If you already know your profit margin percentage, you can calculate B-ROAS directly:
B-ROAS from Margin Formula
Quick calculation if you already know your profit margin percentage.
B-ROAS = 1 / (Profit Margin % / 100)Real-World Examples: B-ROAS Across Different Products
Let's see how B-ROAS varies dramatically based on product economics. These examples demonstrate why understanding your specific B-ROAS is essential before setting advertising budgets.
Example 1: Handmade Jewelry (High Margin)
A jewelry maker with low production costs but premium pricing.
Example 2: Dropshipping Product (Low Margin)
A dropshipper with thin margins and competitive pricing.
Example 3: Private Label Product (Moderate Margin)
A private label product with balanced costs and pricing.
Key Insight
The jewelry maker (1.27x B-ROAS) can profit even on mediocre ad performance, while the dropshipper (4.67x B-ROAS) needs exceptional campaigns to make money. This explains why some businesses thrive with paid ads while others burn through cash. Product economics determine advertising viability.
B-ROAS Benchmarks: What's a Good Break-Even ROAS?
While your B-ROAS is unique to your product economics, these general benchmarks help you evaluate whether paid advertising is a viable growth channel for your business.
| B-ROAS Range | Assessment | Recommendation |
|---|---|---|
| Under 2x | Excellent | Scale aggressively—highly achievable on most platforms |
| 2x - 3x | Good | Very achievable with optimized campaigns |
| 3x - 5x | Moderate | Requires solid creative and targeting—test carefully |
| 5x - 7x | Challenging | Consider raising prices or improving margins first |
| Over 7x | Very Difficult | Paid ads likely not viable—focus on organic/content |
Remember: achieving a higher ROAS than your B-ROAS is your profit zone. If your B-ROAS is 2x and you achieve 3x, you're making $0.50 profit for every $1 spent on ads.
How to Improve Your Break-Even ROAS
A lower B-ROAS means paid advertising is more accessible and profitable. Here are the key levers you can pull to improve your product economics and lower your B-ROAS.
Increase Prices
The most direct way to improve B-ROAS. A 10% price increase can dramatically improve margins. Test higher prices—many products are underpriced.
Reduce COGS
Negotiate with suppliers, order larger quantities, or find alternative materials. Even 5% COGS reduction significantly impacts B-ROAS.
Optimize Markup Costs
Review packaging, handling, and overhead allocation. Streamline operations to reduce per-unit costs without sacrificing quality.
Bundle Products
Higher-priced bundles often have better margins than individual items. Calculate B-ROAS for bundles separately—they may be more ad-friendly.
Common Mistakes When Calculating Break-Even ROAS
Avoid these errors that lead to incorrect B-ROAS calculations and poor advertising decisions.
Mistake 1: Forgetting Additional Costs in COGS
Only including product cost while ignoring shipping to your warehouse, import duties, or quality control costs. Include ALL costs to get your true COGS.
Mistake 2: Ignoring Payment Processing Fees
Payment processors (Stripe, PayPal) take 2.9-3.5% + flat fee per transaction. This reduces your actual profit and should be factored into costs or sale price adjustments.
Mistake 3: Using Gross Margin Instead of Net
Calculating B-ROAS with gross profit (revenue - COGS only) ignores fees, shipping to customers, and returns. Use your true net margin for accurate B-ROAS.
Mistake 4: Not Accounting for Returns
If your return rate is 10%, you need to generate 10% more revenue to hit the same profit. Factor expected returns into your B-ROAS calculation or use adjusted margin.
Using B-ROAS for Ad Budget Planning
Once you know your B-ROAS, you can plan ad budgets with confidence. The advanced feature in our calculator helps you determine maximum ad spend for revenue targets.
Maximum Ad Spend Formula
To hit a revenue target at break-even:
Example: With a 2x B-ROAS and €100,000 revenue target, you can spend up to €50,000 on ads and break even. Any ROAS above 2x turns that into profit.
For complete budget planning including profit targets, use our Reverse ROAS Calculator which builds on your B-ROAS to plan campaigns with specific profit goals. Amazon sellers should also check our Amazon PPC Budget Calculator for ACOS-based budget planning.
Frequently Asked Questions
Ready to Find Your Break-Even ROAS?
Use our calculator above to discover your B-ROAS and determine if paid advertising is viable for your product.
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