Break-even ROAS calculator

What this calculates

Four numbers that decide whether a paid channel is viable before anyone argues about creative:

Break-even ROAS

One divided by gross margin. The revenue per unit of ad spend at which the campaign contributes exactly zero.

Target ROAS

One divided by (gross margin minus the contribution you want to keep). What you must actually achieve for the campaign to be worth running.

Maximum cost per acquisition

Order value times (gross margin minus contribution kept). The ceiling on what one customer may cost.

Maximum cost per lead

Maximum CPA times your lead-to-sale rate. The ceiling for lead-generation campaigns.

How to fill it in honestly

The output is only as good as the margin figure, and margin is where most of these calculations quietly go wrong.

• Deduct cost of goods, payment processing, shipping you absorb, and expected returns before calling it gross margin.
• For services, deduct the delivery cost of fulfilling one engagement, including the hours.
• Use the average order value customers actually pay, not list price.
• If margin varies by product, run the calculation per product group. A blended figure hides the lines that lose money.
• For lead generation, use the lead-to-sale rate from the CRM over a full sales cycle, not the last good month.

A worked example

An order worth 120 with 55 percent gross margin produces 66 of gross profit. Break-even ROAS is 1 ÷ 0.55, about 1.82. To keep 15 percent of revenue as contribution, target ROAS becomes 1 ÷ (0.55 − 0.15) = 2.5, and the maximum acceptable cost per acquisition is 120 × 0.40 = 48. At a 20 percent lead-to-sale rate, the maximum cost per lead is 9.60.

That last number is the one worth carrying into the channel conversation: it converts an abstract efficiency argument into a bid ceiling.

What the result does not tell you

• It does not account for organic and repeat revenue, which make the true ceiling higher.
• It says nothing about whether the leads can be handled — see the lead response leakage calculator.
• It uses platform-independent arithmetic; platform-reported ROAS will differ from CRM-sourced revenue, and the CRM is the one to plan with.
• It assumes advertising is the only variable acquisition cost. Add sales commission and any per-sale fulfilment cost to make it stricter.

Privacy

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