Break-even ROAS is the lowest ROAS at which your ads pay for themselves. Enter your margin or order costs to find it, and add a profit goal to get the ROAS to aim for.
Break-even ROAS
2.50x
At a 40% margin, every $1 of ads must bring in $2.50 of revenue.
What is left of revenue after product, shipping and fees.
Sample numbers shown. Type over them with yours.
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Divide 1 by your profit margin before ad spend, written as a decimal. A 40% margin gives a break-even ROAS of 2.5, so every $1 of ads must bring in $2.50 of revenue. Below that you lose money on each sale. Above it, you keep the difference as profit.
A hypothetical store has an $80 average order. The product costs $30, and shipping and payment fees add $10. It wants to keep 10% of revenue as profit after ads.
The store breaks even at 2.00x and should set its target at 2.50x to keep the profit it wants.
Break-even ROAS follows margin, so it differs by industry. Using Aswath Damodaran’s January 2026 gross margins for US public companies, apparel works out at about 1.76, general retail at about 3.01 and application software at about 1.39. Your own figure will be higher once shipping, fees and returns come out.
| Industry | Break-even ROAS |
|---|---|
| Software (System & Application)Gross margin 71.72%. Aswath Damodaran, NYU Stern | 1.39x |
| Software (Internet)Gross margin 62.58%. Aswath Damodaran, NYU Stern | 1.60x |
| ApparelGross margin 56.88%. Aswath Damodaran, NYU Stern | 1.76x |
| Household ProductsGross margin 51.04%. Aswath Damodaran, NYU Stern | 1.96x |
| Retail (Special Lines)Gross margin 35.30%. Aswath Damodaran, NYU Stern | 2.83x |
| Business & Consumer ServicesGross margin 33.38%. Aswath Damodaran, NYU Stern | 3.00x |
| Retail (General)Gross margin 33.18%. Aswath Damodaran, NYU Stern | 3.01x |
| Retail (Grocery and Food)Gross margin 26.31%. Aswath Damodaran, NYU Stern | 3.80x |
| Total marketGross margin 37.76%. Aswath Damodaran, NYU Stern | 2.65x |
The margins are Damodaran’s. The break-even column is our own sum, 1 divided by the margin. Public company gross margins are a starting point only, because they sit above the costs a single order carries.
Break-even ROAS is the point where the profit from your ad-driven sales exactly covers the ad spend. At that ROAS you make nothing and lose nothing. Any ROAS below it loses money on each sale, and any ROAS above it adds profit. Your margin sets the number, so it’s different for every business.
Break-even ROAS is the floor where ads pay for themselves. Target ROAS is the number you aim for, set above that floor to leave a profit. A store with a 40% margin breaks even at 2.5x. If it wants 10% of revenue as profit, its target is 3.33x.
Use the margin left after every cost a sale carries, apart from ads. For a store that means product cost, shipping, payment fees, and returns if they’re common. Gross margin from your accounts is a fair start, but it usually sits higher, so a break-even ROAS built on it will read too low.
They’re the same limit, shown two ways. Break-even CPA is the most you can pay for one sale, and it equals order value times margin. On an $80 order at a 50% margin that’s $40. Divide the order value by that $40 and you get the 2.00x break-even ROAS.
Then first-order break-even is too strict. A subscription or repeat business can accept a low first-order ROAS, because the profit arrives over later orders. Work out what a customer is worth with the lifetime value calculator, then decide how long you can wait to earn back the ad spend.
Set it above break-even, so a good month leaves profit and a bad month doesn’t lose much. Google Ads takes the target as a percentage, so a 3.33x target goes in as 333%. Base it on conversion values you trust, because a bidding tool will chase whatever revenue you report.
Bidding to a target only works if conversion values are right. Our Google Ads conversion tracking work sends real revenue back to the platform at a fixed price.
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