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Break-even ROAS calculator
The short answer
This break-even ROAS calculator works out the return on ad spend at which your ads stop losing money — using the costs that actually hit an Indian D2C order: product cost, shipping, payment gateway fees and RTO. It also gives you a target ROAS for the profit you want and the maximum cost per acquisition you can afford.
Orders that come back undelivered or returned.
As % of AOV, after ads.
Break-even ROAS
1.95x
Below this, every order loses money.
Target ROAS for 15% profit
2.75x
Max CPA to break even
₹769
Contribution margin 51.3% of AOV
Target CPA
₹544
Calculations run in your browser. Nothing you type is stored or sent anywhere. Outputs are planning estimates, not guarantees.
How the calculation works
- Net revenue per order = AOV × (1 − RTO rate), because returned orders earn nothing.
- Variable cost per order = product cost on delivered orders + forward shipping + gateway fee + reverse shipping on RTO orders.
- Contribution per order = net revenue − variable cost.
- Break-even ROAS = AOV ÷ contribution per order.
- Target ROAS = AOV ÷ (contribution − desired profit per order).
Worked example
A skincare brand with a ₹1,499 AOV, 35% product cost, ₹90 shipping, 2% gateway fee and 8% RTO:
- Contribution per order ≈ ₹769
- Break-even ROAS ≈ 1.95x — below this, every order loses money
- For 15% profit per order (≈ ₹225), target ROAS ≈ 2.75x
- Maximum CPA ≈ ₹769, target CPA ≈ ₹544
What this doesn't include
- Fixed costs — salaries, rent, software, agency fees
- Discounts and coupons (use your average net AOV to account for them)
- Marketplace commissions if you're modelling Amazon or Flipkart
- Repeat purchase value, which may justify spending above break-even on a first order
Break-even ROAS by contribution margin
| Contribution margin | Break-even ROAS |
|---|---|
| 70% | 1.43x |
| 60% | 1.67x |
| 50% | 2.0x |
| 40% | 2.5x |
| 30% | 3.33x |
| 25% | 4.0x |
| 20% | 5.0x |
How to use break-even ROAS in campaign targets
Break-even ROAS is the floor, not the target. Set target ROAS above break-even to cover fixed costs and profit — and allow prospecting campaigns to run closer to break-even when repeat purchases make new customers valuable over time.
A worked example: a COD-heavy brand
A brand sells a ₹1,000 product with ₹400 product cost, ₹80 shipping, ₹30 payment and packaging costs and a 20% COD return rate that costs ₹100 per returned order. Contribution per delivered order is roughly ₹490, and after returns the effective margin per order is lower still. Measured against ordered revenue, its break-even ROAS works out to about 2.7 — far higher than the 1.7 the founder assumed from product margin alone.
Break-even ROAS vs target ROAS
| Break-even ROAS | Target ROAS | |
|---|---|---|
| Meaning | No profit, no loss on the order | Desired efficiency |
| Use | Floor for campaigns | Bid strategy setting |
| Depends on | Contribution margin | Business goals and LTV |
Frequently asked questions
Should we run ads below break-even ROAS?
Only deliberately — for example, when strong repeat purchase means the first order can lose money and the customer still pays back within your target period. Know your payback period before doing it.
Why is my break-even ROAS higher than 1 ÷ gross margin?
Because shipping, fees and returns reduce contribution below gross margin. That gap is exactly why gross-margin-only calculations are dangerous in Indian eCommerce.
Should each product have its own target?
Yes, if margins differ meaningfully. Account-wide targets over-spend on thin-margin products and under-spend on profitable ones.
What is contribution margin?
Revenue minus variable costs directly tied to each sale — product cost, shipping, payment fees, returns. See contribution margin.
Can we run campaigns below break-even ROAS?
Sometimes deliberately — for new-customer acquisition when repeat purchases make customers profitable over time. Track payback carefully.
Should break-even ROAS include fixed costs?
Usually not — it covers variable costs per order; fixed costs are covered by the margin above break-even.
Does break-even ROAS change over time?
Yes — whenever prices, costs, discounts or return rates change.
Should we include GST in the calculation?
Use prices and costs consistently — either both including or both excluding GST.
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