Revenue is not profit. Enter your margin to get the break-even ROAS you actually need, the target ROAS for a profit goal, your POAS (profit on ad spend), and the max CPA you can afford.
Break-even ROAS = 1 ÷ gross margin. The lower your margin, the higher the ROAS you need just to avoid losing money.
| Gross margin | Break-even ROAS | POAS at 2× ROAS |
|---|---|---|
| 10% | 10.00× | 0.20× |
| 15% | 6.67× | 0.30× |
| 20% | 5.00× | 0.40× |
| 25% | 4.00× | 0.50× |
| 30% | 3.33× | 0.60× |
| 40% | 2.50× | 0.80× |
| 50% | 2.00× | 1.00× |
| 60% | 1.67× | 1.20× |
| 70% | 1.43× | 1.40× |
Break-even ROAS is the return on ad spend at which your ad revenue exactly covers your product costs plus the ad spend itself. It equals 1 divided by your gross margin. At a 30% margin, break-even ROAS is 3.33×; at 50% it is 2.0×.
Target ROAS = 1 ÷ (gross margin − desired net profit margin). For a 40% gross margin and a 10% net profit goal, target ROAS = 1 ÷ 0.30 = 3.33×. Your desired profit must be lower than your gross margin.
POAS (profit on ad spend) measures profit, not revenue, per dollar of ad spend. POAS = ROAS × gross margin. A 4× ROAS at a 25% margin is a POAS of 1.0, meaning you break even. ROAS can look great while POAS shows you are losing money.
There is no universal "good" ROAS, only break-even for your margin. A 2× ROAS is profitable at a 60% margin but loses money at a 30% margin. Always compare ROAS to your break-even ROAS, not to an industry average.
At break-even, your maximum cost per acquisition equals your average order value times your gross margin (AOV × margin). To keep a profit, subtract your desired profit margin first: max CPA = AOV × (margin − desired profit).
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