Formula
Break-even ROAS = 1 ÷ Gross margin rateWhat the result means
Break-even ROAS estimates the advertising return at which gross profit equals ad spend. With a 40% gross margin, each $1 of revenue contributes $0.40 before advertising, so the campaign needs a ROAS of 1 ÷ 0.40 = 2.5×.
This is a contribution-level threshold. It does not automatically cover payroll, software, rent, taxes or other fixed operating expenses.
Use the right margin
Enter gross margin after product costs and other truly variable costs that you want the campaign to recover. Do not enter markup: margin and markup use different denominators.
Practical limitation
The formula assumes margin remains constant as sales volume changes. Discounts, refunds, product mix and fulfillment tiers can alter the real threshold.
Assumptions
- Gross margin is measured before advertising spend.
- Fixed operating expenses are excluded.
Sources and methodology
CalcMotive publishes the formula and assumptions so you can decide whether the estimate fits your use case. See our methodology standards.