Every e-commerce brand that scaled itself broke did the same thing: poured budget into products that didn't have the margin to support the ad spend. Break-even ROAS is the number that tells you exactly where profitable spending ends and losing money begins.
The formula
Break-even ROAS = 1 ÷ contribution margin. If your product's contribution margin is 40%, your break-even ROAS is 2.5 (1 ÷ 0.40). At a 2.5x return on ad spend you're breaking even; below it you lose money on every sale; above it you make money. A 50% margin breaks even at 2.0x; a 25% margin needs 4.0x just to tread water.
Contribution margin is the input that matters
Contribution margin is revenue minus every variable cost: product/COGS, payment processing fees, fulfillment and shipping, and expected returns. Most sellers overstate it by forgetting fees and returns, which makes their break-even ROAS look better than reality — and turns 'profitable' campaigns into quiet losers.
Target ROAS vs. break-even ROAS
Break-even is the floor, not the goal. Your target ROAS must clear break-even by enough to also cover overhead and leave profit. If break-even is 2.5x, a target of 3.5–4x might be what actually funds the business. Knowing both numbers keeps you from scaling a campaign that's technically 'positive ROAS' but losing money after overhead.
Know your numbers before you scale
The Margin & Break-Even ROAS Calculator computes true net margin after COGS, fees, and shipping, then hands you the exact break-even ROAS and max CAC for each product.
Open the free Margin & Break-Even ROAS Calculator →
Frequently asked questions
What is a good ROAS for e-commerce?
It depends entirely on your margin. Break-even ROAS is 1 ÷ contribution margin, so a 40% margin breaks even at 2.5x. Your target should clear that floor with room for overhead and profit.
How do I calculate break-even ROAS?
Divide 1 by your contribution margin. If margin is 50%, break-even ROAS is 2.0; if margin is 33%, it's about 3.0.
Why is my 'profitable' ROAS still losing money?
Usually because contribution margin was overstated — fees, shipping, and returns weren't subtracted — or because target ROAS only cleared break-even without covering overhead.