Breakeven ROAS Explained (Definition, Formula & Why It's Essential)
You’ve probably already heard people throw around Return On Ad Spend (ROAS) like it’s the holy grail of ad performance.
“Hey, this campaign hit a 3x ROAS!”
Cool. But was it profitable?
That’s where Breakeven ROAS (or BEROAS) comes in.
It’s one of the most important number most marketers don’t actually know.
What is Breakeven ROAS?
Breakeven ROAS is the minimum ROAS you need to hit to avoid losing money on your ads.
It’s your true north. The line between profit and loss.
If your campaign’s ROAS is higher than your breakeven ROAS → you’re profitable.
If it’s lower → you’re burning cash.
Simple as that.
Here’s the formula:
Breakeven ROAS = 1 ÷ Profit Margin
A quick example
Let’s say you sell a skincare product for €50.
Product cost: €12
Shipping + packaging: €5
Transaction + platform fees: €3
That’s €20 total cost, meaning a €30 gross profit.
Your profit margin = €30 ÷ €50 = 0.6 (60%)
So your Breakeven ROAS = 1 ÷ 0.6 = 1.67
That means every €1 you spend on ads needs to generate €1.67 in sales just to cover costs.
Anything below that, and you’re technically losing money.
Why Breakeven ROAS matters more than ROAS
ROAS on its own doesn’t mean much.
A 3x ROAS can be amazing for one brand — and a disaster for another — depending on margins.
Here’s a quick look:
Profit Margin | Breakeven ROAS | Notes |
|---|---|---|
70% | 1.43 | Super healthy margin. Room to scale |
50% | 2.00 | Solid. Aim for 2.5x+ to profit |
30% | 3.33 | Harder to scale on paid ads |
20% | 5.00 | Nearly impossible to sustain |
Your Breakeven ROAS gives context to your ROAS.
Without it, you’re flying blind.
How to calculate your Breakeven ROAS
You don’t need a fancy calculator (though plenty exist).
All you need are three things:
Your selling price: what the customer pays.
Your total cost per unit: COGS + packaging + shipping + transaction fees.
Your profit margin: (Price – Cost) ÷ Price.
Then apply the formula:
1 ÷ Profit Margin = Breakeven ROAS
That’s it.
Once you know this number, you’ll see your campaigns differently.
How to use Breakeven ROAS in your ad strategy
Once you’ve calculated your BEROAS, here’s how to actually use it:
1. Set clear profitability thresholds
Label your campaigns like this:
✅ Profitable (ROAS > BEROAS)
⚠️ At-risk (ROAS ≈ BEROAS)
🔴 Unprofitable (ROAS < BEROAS)
That instantly tells you where to scale or cut spend.
2. Evaluate creative testing smarter
During testing, a new ad hitting 1.5x ROAS might sound weak — but if your BEROAS is 1.2x, that’s a keeper.
3. Align your pricing strategy
If your BEROAS is too high (like 4–5x), you may need to raise prices, lower costs, or introduce bundles to protect margins.
4. Combine with LTV data
BEROAS only looks at first-purchase profitability.
If your repeat purchase rate is strong, your true breakeven ROAS can be lower.
(You can afford to acquire customers at a smaller upfront margin.)
Common mistakes to avoid
Even experienced marketers mess this up.
Here are the usual traps:
Forgetting shipping and packaging costs
Ignoring payment or platform fees
Not including VAT or transaction costs
Using average ROAS instead of product-specific margins
Forgetting that costs change (inflation, shipping, supplier updates)
Keep your BEROAS updated every few months. It’s not a “set and forget” metric.
The bottom line
Breakeven ROAS isn’t just a nice-to-have metric.
It’s the reality check for every ad account.
It tells you:
When you’re profitable
When you’re losing money
When to scale with confidence
If you know your BEROAS, you make smarter, faster decisions.
If you don’t — your ad budget might be working against you.