The formulas
ROAS = revenue / ad spend ACoS = ad spend / revenue × 100 break-even ROAS = 1 / contribution margin break-even ACoS = contribution margin × 100
ROAS and ACoS are the same fact stated two ways — one is the reciprocal of the other. A ROAS of 4 is an ACoS of 25%. Amazon sellers tend to use ACoS, everyone else ROAS, and neither says anything about profit on its own.
The one relationship worth memorising
Your break-even ACoS is your contribution margin. Not approximately — exactly.
If 30% of each sale is left after goods, fees and fulfilment, you can spend up to 30% of revenue on advertising before the campaign consumes everything it earns. That is a break-even ROAS of 1 / 0.30 = 3.33.
| Margin | Break-even ROAS | Break-even ACoS |
|---|---|---|
| 10% | 10.00 | 10% |
| 15% | 6.67 | 15% |
| 20% | 5.00 | 20% |
| 25% | 4.00 | 25% |
| 30% | 3.33 | 30% |
| 40% | 2.50 | 40% |
| 50% | 2.00 | 50% |
This is why “is a ROAS of 3 good?” has no answer without the margin. At a 40% margin it is comfortably profitable. At 25% it loses money on every order.
Worked example
1,200 spent on ads returning 6,000 of revenue, on products carrying a 30% contribution margin:
- ROAS = 6,000 / 1,200 = 5.00
- ACoS = 1,200 / 6,000 = 20.0%
- break-even ROAS = 3.33 · break-even ACoS = 30%
- contribution before ads = 6,000 × 0.30 = 1,800
- profit after ads = 1,800 − 1,200 = 600
The campaign clears its threshold with room to spare. Note how little of the headline number survives: 6,000 of revenue leaves 600 of profit — one euro in ten.
What counts as contribution margin here
Everything that varies with the sale comes out before you get to the margin: the goods, inbound shipping, marketplace commission, fulfilment, payment fees, packaging and an allowance for returns.
What does not come out is the advertising itself — that is what you are measuring against. Subtracting ad cost inside the margin and then comparing it to the ad spend double-counts it and makes every campaign look worse than it is.
If you are unsure of the figure, the Amazon FBA and Allegro calculators on this site produce it directly: run one with the advertising field set to zero, and the net margin it reports is the number to use here.
Why break-even is not the target
Break-even ROAS is the floor, not the goal. Advertising at exactly break-even grows revenue while contributing nothing to fixed costs — rent and salaries are still unpaid.
There are good reasons to run at or below it for a while: launching a product, building review volume, defending a listing against a competitor. All of them are deliberate investments with an end date. The problem is running below break-even without noticing, which is what happens when ROAS is judged against a benchmark instead of a margin.
Frequently asked questions
Anything above 1 / your contribution margin. There is no universal figure — a ROAS of 2 is profitable at a 50% margin and loss-making at 25%. Any benchmark quoted without a margin attached is worthless.
They are reciprocals. ACoS = 100 / ROAS. A ROAS of 5 is an ACoS of 20%. ROAS is a multiple you want high; ACoS is a percentage you want low.
TACoS measures ad spend against total sales, not just attributed ones. It is the better long-run indicator: if ACoS holds steady while TACoS falls, your organic sales are growing and the advertising is doing its job beyond the click.
No. Use net revenue and a net margin. Including VAT inflates the revenue side while the ad spend stays the same, which makes ROAS look better than it is by roughly the tax rate.
Break-even ROAS only covers the variable costs of the advertised sales. Fixed costs and unadvertised overheads sit outside it. Check the break-even point calculator: contribution has to cover the fixed base before any of it becomes profit.