How it is calculated

Margin before ads = price minus product cost, shipping, fees (a percent of the price) and other costs. Break-even ROAS = price divided by that margin. Break-even cost per sale = the margin.

Margin before ads is what one sale leaves after the product, the shipping, the fees and any other cost of the order, before you pay for the ad that brought it. Payment and platform fees are a percent of the price, so they grow with it.

ROAS is revenue divided by ad spend. At the break-even ROAS, the price divided by that margin, the ads take the whole margin and the order makes nothing: above it the ads make money, below it every sale loses some. Read as a cost, the same point is the break-even cost per sale, the most you can pay in ads for one order, equal to the margin.

When the costs come to the price or more, nothing is left to pay for ads and the ROAS shows n/a: no ROAS makes the product break even until the price goes up or a cost comes down.

A worked example

These are the numbers the calculator opens with, so you can follow each step in the form above.

  1. A product sells for €49.00. It costs €14.00 to make and €6.00 to ship, other costs come to €1.00 an order, and payment and platform fees take 3.5% of the price.
  2. Margin before ads: €49.00 minus €14.00, €6.00, €1.00 and 3.5% of €49.00 leaves €26.29, which is 53.6% of the price.
  3. Break-even ROAS: €49.00 divided by €26.29 is 1.86. Ads that bring back more than 1.86 in sales for each unit spent make money on this product.
  4. Break-even cost per sale: €26.29. An order that costs more than that in ads loses money.

Terms used: Break-even ROAS, ROAS (return on ad spend), CPA (cost per acquisition), Contribution margin.

Before you set a budget, see what already works in your niche: the Meta ads library shows the ads that have run for weeks, with the estimated spend of the ones shown in the EU and the UK.

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