Break-even ROAS calculator — contribution margin method

Ad platforms show ROAS. What they hide: your break-even ROAS depends on contribution margin per order — not gross margin on COGS alone. Below break-even, every ad dollar loses money before payroll or apps.

Break-even ROAS formula

Contribution margin % = (Sale price − COGS − Shipping − Payment fees − Returns reserve) ÷ Sale price

Break-even ROAS = 1 ÷ Contribution margin %

Exclude ad spend from contribution margin — ROAS is what you're trying to cover. Fixed costs (salaries, Shopify plan) sit above this floor.

Example: $48 DTC serum

$48 sale · $14 COGS · $4.50 ship · ~$1.70 processing (2.9%+$0.30) · $1 returns reserve → contribution ≈ $26.80 (56%)

Break-even ROAS = 1 ÷ 0.56 ≈ 1.79× — Meta showing 1.5× means you're underwater on variable costs alone.

Target ROAS for scale: break-even × 1.3–1.5 (covers fixed overhead + profit buffer).

Why “4× ROAS” can still lose money

• Low contribution margin — heavy discounts, free shipping, high returns
• Blended AOV — hero SKU profitable, add-ons drag margin down
• Platform fees — TikTok Shop, Amazon, Etsy referral stacks differ per channel

When to upgrade from a calculator

At 300+ orders/month, TrueProfit ($35+/mo) syncs ad spend and orders automatically. Until then, model unit economics first — then scale ads with a known floor.

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