Glossary · Core metricsTOFU
Break-even ROAS
The short answer
Break-even ROAS is the return on ad spend at which your advertising neither makes nor loses money on the order. Below it, every sale costs more to acquire than it earns. Calculate it as 1 divided by your contribution margin percentage.
If an order leaves 40% of its value as contribution after product cost, shipping, payment fees and returns, your break-even ROAS is 1 ÷ 0.40 = 2.5x. A campaign at 3.0x is profitable on the first order; one at 2.0x is losing money.
Why gross margin alone isn't enough
Many brands calculate break-even from gross margin only. In Indian eCommerce that's dangerously optimistic, because shipping, payment gateway fees, packaging and — especially — COD returns take a large bite out of every order. Use contribution margin, not gross margin.
Worked example
- AOV ₹1,499, product cost 35%, shipping ₹90, gateway 2%, RTO 8%
- Contribution per order ≈ ₹769 after these costs
- Break-even ROAS ≈ 1,499 ÷ 769 ≈ 1.95x
- For a 15% profit per order after ads, target ROAS ≈ 2.75x
Run your own numbers with the break-even ROAS calculator.
Break-even ROAS quick reference
| Contribution margin | Break-even ROAS |
|---|---|
| 60% | 1.67x |
| 50% | 2.0x |
| 40% | 2.5x |
| 30% | 3.33x |
| 25% | 4.0x |
Calculate yours with the break-even ROAS calculator.
Break-even ROAS in practice
A product sells for ₹2,000 with a contribution margin of ₹800 after product, shipping, payment and return costs. Break-even ROAS is 2,000 ÷ 800 = 2.5. Campaigns below 2.5 lose money on the first order; above it, they contribute profit.
How to use it
- Set campaign floors at break-even ROAS
- Allow lower ROAS for new customers if LTV justifies it
- Recalculate when prices or costs change
Break-even ROAS for Indian D2C brands
COD returns, payment-gateway fees, GST treatment and heavy festive discounting all change the real margin per order. Indian brands that calculate break-even ROAS from product margin alone usually set targets too low and scale unprofitable campaigns.
Frequently asked questions
Is break-even ROAS the right target?
No — it's the floor. Your target should include the profit you want per order, or be deliberately below break-even only if strong repeat purchase justifies losing money on the first order.
Does break-even ROAS change by product?
Yes. Different products have different margins, which is why SKU-level targets beat one account-wide number.
Should we include agency fees in break-even ROAS?
Break-even ROAS usually considers variable costs per order. Fixed costs such as fees and salaries are covered by the profit above break-even.
Why is my break-even ROAS higher than expected?
Shipping, payment fees, returns and discounts often reduce contribution margin more than expected.
What's the difference between break-even ROAS and target ROAS?
Break-even is the floor; target ROAS includes the profit you want and your growth goals.
Does break-even ROAS include ad agency fees?
Some businesses include them; be consistent about what's included.
How do COD returns change break-even ROAS?
Returned orders earn no revenue but still cost shipping and ad spend, raising the ROAS you need to break even.
Use our calculator?
Yes — the break-even ROAS calculator works it out from your costs.
Related terms
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