Break-even ROAS
The ROAS at which an ad exactly pays for itself after product, shipping and other variable costs. It comes from your own margins, so the same ROAS can be a win for one brand and a loss for another.
Contribution margin here is CM1 as a share of net realised revenue: what's left after fulfilment costs (product, shipping, payment gateway fees and handling, including the return leg on RTO), before ad spend.
What is break-even ROAS?
ROAS tells you how much revenue each rupee of ad spend brought back. It doesn't tell you whether that revenue made money. A ₹1,000 order can leave ₹600 after costs for a skincare brand and ₹250 for an electronics accessories brand.
Break-even ROAS is the line between those two worlds. Above it, every rupee of spend returns more contribution than it costs. Below it, the ad is buying revenue at a loss. Asking "is a ROAS of 2.5 good?" only has an answer once you know this number.
How it's calculated
Start with an average order and take out every cost that grows with each order. What remains, as a share of revenue, is your contribution margin before ads. Break-even ROAS is one divided by that share.
| Input | Where it comes from | What it gives us |
|---|---|---|
| net_revenue | Orders, after discounts, GST, cancellations and RTO | The base everything is a share of |
| cogs | Product cost per SKU | Fulfilment cost (CM1) |
| fulfilment | Shipping, payment gateway fees, handling | Fulfilment cost (CM1) |
| rto_cost | Forward and return shipping on undelivered orders | Shipping inside fulfilment, giving CM1, the margin before ads |
Keeping it current
Break-even ROAS isn't a number you set once. It moves whenever your margin moves, and margin moves more often than most teams update it.
- 1Product mix shiftsA campaign selling more low-margin combos has a higher break-even than one selling hero SKUs.
- 2Discounts changeA sale cuts revenue per order but not COGS, so break-even jumps during every sale event.
- 3RTO rate movesMore COD orders from new geos means more RTO cost, and a lower CM1.
Recalculate it per campaign from the SKUs that campaign actually sells, and refresh it at least monthly and before any sale.
Worked examples
Example 1: Building break-even from one order
An illustrative brand's average order brings in ₹1,000 of net realised revenue. Here's where it goes.
| Line | Per order | Share of revenue |
|---|---|---|
| Net realised revenue | ₹1,000 | 100% |
| Product cost (COGS) | −₹300 | 30% |
| Shipping, incl. return leg on RTO (averaged) | −₹130 | 13% |
| Payment gateway | −₹20 | 2% |
| Handling (packaging, pick-pack) | −₹20 | 2% |
| CM1 (before ads) | ₹530 | 53% |
| Break-even ROAS | 1 ÷ 0.53 = 1.89 | |
If the brand wants 15% of revenue left as profit after ads, its target ROAS is 1 ÷ (0.53 − 0.15) = 2.63.
Example 2: Same ROAS, opposite outcomes
Two illustrative brands both report a true ROAS of 2.5. For every ₹100 they spend on ads:
Using break-even ROAS to decide
Compare each campaign's true ROAS to its own break-even, not a brand-wide average. Treat these bands as a starting point and tune them to your cash position and growth goals.
Common mistakes
- Borrowing someone else's number"Aim for 3x" is meaningless without your margin. Work it out from your own costs.
- Using gross margin onlyLeaving out shipping, payment and RTO makes break-even look lower than it is.
- Comparing to platform ROASPlatform ROAS over-counts orders and uses gross value. Compare against true ROAS on net revenue.
- One number for the whole brandA combo-heavy campaign and a hero-SKU campaign have different break-evens.
Frequently asked questions
What is a good break-even ROAS?
Lower is better, because it means you have more margin to spend on ads. But there's no universal good number. It's set by your costs, so the useful question is how far your true ROAS sits above it.
Should operational costs like salaries go in?
No. Break-even ROAS uses only fulfilment costs, which rise with each order. Operational costs (team, warehouses, software) come out of total CM2 to give CM3, which is why target ROAS sits above break-even.
How is it different from POAS?
They're two views of the same idea. Break-even ROAS is the bar a ROAS has to clear. POAS already has margin built in, so its break-even is always 1.
Does it change during a sale?
Yes. Discounts cut revenue per order while product cost stays the same, so CM1 falls and break-even rises. Recalculate it for the sale period before setting bids.
Related metrics
Know your break-even for every campaign
BooleanMaths calculates CM1 by SKU and campaign, so you can see true ROAS against the break-even of what each campaign actually sells.
Break-even ROAS
The ROAS at which an ad exactly pays for itself after product, shipping and other variable costs. It comes from your own margins, so the same ROAS can be a win for one brand and a loss for another.
Contribution margin here is CM1 as a share of net realised revenue: what's left after fulfilment costs (product, shipping, payment gateway fees and handling, including the return leg on RTO), before ad spend.
What is break-even ROAS?
ROAS tells you how much revenue each rupee of ad spend brought back. It doesn't tell you whether that revenue made money. A ₹1,000 order can leave ₹600 after costs for a skincare brand and ₹250 for an electronics accessories brand.
Break-even ROAS is the line between those two worlds. Above it, every rupee of spend returns more contribution than it costs. Below it, the ad is buying revenue at a loss. Asking "is a ROAS of 2.5 good?" only has an answer once you know this number.
How it's calculated
Start with an average order and take out every cost that grows with each order. What remains, as a share of revenue, is your contribution margin before ads. Break-even ROAS is one divided by that share.
| Input | Where it comes from | What it gives us |
|---|---|---|
| net_revenue | Orders, after discounts, GST, cancellations and RTO | The base everything is a share of |
| cogs | Product cost per SKU | Fulfilment cost (CM1) |
| fulfilment | Shipping, payment gateway fees, handling | Fulfilment cost (CM1) |
| rto_cost | Forward and return shipping on undelivered orders | Shipping inside fulfilment, giving CM1, the margin before ads |
Keeping it current
Break-even ROAS isn't a number you set once. It moves whenever your margin moves, and margin moves more often than most teams update it.
- 1Product mix shiftsA campaign selling more low-margin combos has a higher break-even than one selling hero SKUs.
- 2Discounts changeA sale cuts revenue per order but not COGS, so break-even jumps during every sale event.
- 3RTO rate movesMore COD orders from new geos means more RTO cost, and a lower CM1.
Recalculate it per campaign from the SKUs that campaign actually sells, and refresh it at least monthly and before any sale.
Worked examples
Example 1: Building break-even from one order
An illustrative brand's average order brings in ₹1,000 of net realised revenue. Here's where it goes.
| Line | Per order | Share of revenue |
|---|---|---|
| Net realised revenue | ₹1,000 | 100% |
| Product cost (COGS) | −₹300 | 30% |
| Shipping, incl. return leg on RTO (averaged) | −₹130 | 13% |
| Payment gateway | −₹20 | 2% |
| Handling (packaging, pick-pack) | −₹20 | 2% |
| CM1 (before ads) | ₹530 | 53% |
| Break-even ROAS | 1 ÷ 0.53 = 1.89 | |
If the brand wants 15% of revenue left as profit after ads, its target ROAS is 1 ÷ (0.53 − 0.15) = 2.63.
Example 2: Same ROAS, opposite outcomes
Two illustrative brands both report a true ROAS of 2.5. For every ₹100 they spend on ads:
Using break-even ROAS to decide
Compare each campaign's true ROAS to its own break-even, not a brand-wide average. Treat these bands as a starting point and tune them to your cash position and growth goals.
Common mistakes
- Borrowing someone else's number"Aim for 3x" is meaningless without your margin. Work it out from your own costs.
- Using gross margin onlyLeaving out shipping, payment and RTO makes break-even look lower than it is.
- Comparing to platform ROASPlatform ROAS over-counts orders and uses gross value. Compare against true ROAS on net revenue.
- One number for the whole brandA combo-heavy campaign and a hero-SKU campaign have different break-evens.
Frequently asked questions
What is a good break-even ROAS?
Lower is better, because it means you have more margin to spend on ads. But there's no universal good number. It's set by your costs, so the useful question is how far your true ROAS sits above it.
Should operational costs like salaries go in?
No. Break-even ROAS uses only fulfilment costs, which rise with each order. Operational costs (team, warehouses, software) come out of total CM2 to give CM3, which is why target ROAS sits above break-even.
How is it different from POAS?
They're two views of the same idea. Break-even ROAS is the bar a ROAS has to clear. POAS already has margin built in, so its break-even is always 1.
Does it change during a sale?
Yes. Discounts cut revenue per order while product cost stays the same, so CM1 falls and break-even rises. Recalculate it for the sale period before setting bids.
Related metrics
Know your break-even for every campaign
BooleanMaths calculates CM1 by SKU and campaign, so you can see true ROAS against the break-even of what each campaign actually sells.