Performance

Break-even ROAS

Also known as: breakeven ROAS · minimum ROAS · target ROAS floor

Definition

Break-even ROAS is the return on ad spend at which advertising exactly pays for itself after product margin, calculated as 1 divided by gross margin. Any ROAS below it loses money on the sale, however healthy the dashboard looks.

It's the floor under every ROAS target, and it should be set before a campaign launches, not discovered afterwards. The margin has to be the real one: product cost plus the variable costs that rise with each order, which in UAE e-commerce include payment fees, delivery subsidies, returns and failed cash-on-delivery orders. The more of those you count, the higher the floor.

A floor isn't a target. To keep a profit after ad spend, subtract it from the margin first. Say you want to keep 10% of revenue after ads on a 40% margin: divide 1 by 0.30 and the target ROAS is about 3.3. Compare that figure with the platform's reported ROAS only after confirming it counts the same orders, over the same window, that your margin was calculated on.

Formula

Break-even ROAS = 1 ÷ Gross margin (as a decimal)

Worked example

Say a product has a 40% gross margin. Break-even ROAS is 1 ÷ 0.4 = 2.5, so every AED 1 of ad spend must bring back AED 2.50 of revenue before the sale covers its own advertising.

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