The break-even ROAS formula
Break-even ROAS = revenue ÷ (revenue − variable costs)
First subtract product, fulfillment, payment and other variable costs from order revenue. That remainder is contribution before advertising: the maximum this order can spend on ads before its modeled contribution reaches zero.
Equivalently, divide 1 by your pre-ad contribution margin as a decimal. A 45% margin gives 1 ÷ 0.45 = about 2.22× ROAS. Do not substitute markup for margin: they use different denominators.
Worked example
With 100 in order revenue, 40 in product costs, 10 in fulfillment and 5 in other variable costs, 45 remains for advertising. To also keep 10% of revenue after ads, spend at most 35 per order. Your target becomes 100 ÷ 35 = 2.86×.
What this threshold covers
This is a contribution break-even estimate for the costs you enter, not the whole business's accounting break-even. Rent, salaries and fixed subscriptions are excluded unless you deliberately allocate them into costs. The desired contribution can leave room for overhead and profit, but is not a promise of net profit.
Use realistic expected return losses and payment costs. Our Shopify fee calculator can estimate the payment portion. For a mixed catalog, use a sales-weighted representative order rather than your highest-margin item.
Use it before offering a discount
A discount reduces revenue while many order costs stay the same. In the example above, lowering revenue from 100 to 90 leaves 35 before ads and raises break-even ROAS to 2.57×. Check the new threshold before increasing campaign spend.
Then compare actual campaign performance using the ROAS calculator. Revenue lift, conversion lift and contribution lift answer different questions.
Common questions
What happens when costs exceed revenue?
There is no positive advertising allowance. Even without ad spend, the modeled order loses money. The calculator shows no finite break-even ROAS instead of suggesting a misleading negative target.
Is break-even CPA the same as customer acquisition cost?
The amount shown is the maximum advertising cost per modeled order. It approximates a break-even CPA when one paid acquisition produces one order. It is not a complete customer acquisition cost calculation and excludes future customer orders.
Can I use customer lifetime value instead?
Only with a separate model of contribution, repeat purchases, timing and retention costs. This tool deliberately models one order so uncertain future revenue does not silently justify today's spend.
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