Breakeven ROAS calculator for DTC brands

Breakeven ROAS is the minimum return on ad spend at which your ad-driven revenue covers your ad spend plus every variable cost attached to producing and delivering the order — COGS, shipping, fulfillment, payment processing, platform fees, and expected returns. Below that number, every new order loses money.

Subtract all variable costs from net revenue to get contribution margin. Your breakeven ROAS equals net revenue divided by contribution margin. At $60 AOV with 30% COGS, $6.50 ship, $3 fulfillment, 2.9%+$0.30 processor, 2% platform fee, and 10% returns, your contribution margin is about $25 — so your breakeven ROAS is 2.4x.

Meta and Google report gross ROAS against revenue only. Your real breakeven ROAS has to cover COGS, shipping, fulfillment, payment fees, and returns. For a typical apparel brand with 25% returns and 35% COGS, breakeven lands closer to 3.5-4x — so 3x is losing money on every first-order sale.

A repeat customer generates a second order with no ad spend attached. If 40% of first-time buyers place a second order at the same AOV, you effectively acquire 1.4 orders per ad-acquired customer. That divides your first-order breakeven ROAS by 1.4 — a 3.4x first-order breakeven drops to 2.4x when factoring LTV.

Every dollar of shipping, fulfillment, and payment-processing fees is a dollar you can't use to cover ad spend. Add merchant-paid shipping, pick-and-pack, the 2.9% + $0.30 processor fee, and the Shopify transaction fee (0-2% depending on plan) to your cost stack before computing contribution margin.

Dropshipping COGS typically runs 50-65% of AOV, which crushes contribution margin. At $40 AOV with 60% COGS, 8% returns, and typical fees, breakeven ROAS often lands above 5x. That's why most dropship stores can't scale on paid ads alone.

There is no universal good ROAS — it depends on your contribution margin. A jewelry brand at 75% gross margin can run 1.8x ROAS profitably. An electronics brand at 45% margin needs 2.5x+ just to breakeven. Use the calculator with your real numbers, not industry averages.

Platform-reported ROAS is inflated by attribution overlap and last-click bias. Blended MER (total revenue / total ad spend across channels) is closer to truth. Use ROAS for campaign-level decisions and MER for portfolio-level profitability. Your breakeven threshold in this tool is the floor for MER.

Target ROAS is breakeven plus the margin you want to keep. If your breakeven is 2.4x and you want a 30% net margin after ad spend, target 3.4x ROAS. This tool outputs that number directly once you set a target contribution margin.

Two common reasons. First, platform-attributed ROAS double-counts organic + direct revenue that would have happened anyway, so your real ad contribution is lower. Second, your breakeven was never where you thought it was — shipping, returns, and fees shave 15-25% off margin most operators forget to model. Fix both and the gap disappears.