How to calculate break-even for ad campaigns: step by step
Calculating break-even before you launch a campaign tells you the minimum it needs to achieve. After launch, it tells you whether to keep going or pause.
Calculate break-evenStep-by-step break-even calculation
1
Calculate contribution margin per sale
Contribution margin = AOV × Gross margin %
Example: $60 AOV × 35% = $21 per sale
2
Divide ad spend by contribution margin
Break-even sales = Ad spend ÷ Contribution margin
Example: $500 ÷ $21 = 23.8 → need 24 sales
3
Convert to minimum ROAS
Minimum ROAS = 1 ÷ Gross margin
Example: 1 ÷ 0.35 = 2.86x minimum ROAS
4
Set your target above break-even
For 25% ROI target: target ROAS = minimum ROAS × 1.25
Example: 2.86 × 1.25 = 3.57x target ROAS
Quick reference formula
Break-even = Spend ÷ (AOV × Margin)
Min ROAS = 1 ÷ Margin
Max CPA = AOV × Margin