A useful breakeven ROAS calculation starts with unit economics, not an arbitrary industry target. The goal is to find how much contribution profit remains from an order before advertising cost.
Step 1: Calculate net revenue per order
Start with average order value, then account for discounts, shipping charged to the customer and expected returns or refunds.
Step 2: Add variable costs
Include COGS, fulfillment, outbound shipping, payment processing, packaging and any variable cost that increases when an order is placed.
Step 3: Find contribution margin
UNIT ECONOMICSContribution Margin = Net Revenue − Variable Costs
This is the amount available to pay for advertising and then contribute to profit.
Step 4: Convert that margin into ROAS
Divide net revenue by contribution margin. If net revenue is $75 and contribution margin is $30, breakeven ROAS is 2.5x.
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Calculate my breakeven ROASCommon calculation mistakes
- Using gross margin while ignoring shipping and fees
- Ignoring discount rate
- Ignoring returns
- Confusing platform revenue with true net revenue
- Treating breakeven ROAS as the final profit target
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