Business arithmetic / CLEARBYTE

Break-even ROAS table by contribution margin

In the simplified model, break-even ROAS equals one divided by the pre-ad contribution-margin fraction. At a 40% contribution margin, revenue must equal 2.5 times ad spend to cover that spend.

Break-even ROAS table by contribution margin

In the simplified model, break-even ROAS equals one divided by the pre-ad contribution-margin fraction. At a 40% contribution margin, revenue must equal 2.5 times ad spend to cover that spend.
Pre-ad contribution marginBreak-even ROAS multipleSame ROAS as percentRevenue to cover 100 ad spend
10.00%10.00×1000.00%1000.00
20.00%5.00×500.00%500.00
25.00%4.00×400.00%400.00
30.00%3.33×333.33%333.33
40.00%2.50×250.00%250.00
50.00%2.00×200.00%200.00
60.00%1.67×166.67%166.67
75.00%1.33×133.33%133.33
80.00%1.25×125.00%125.00
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Formula & method

Contribution after ads = revenue × margin fraction − ad spend
Break-even ROAS = 1 ÷ margin fraction

Calculate the contribution margin after the variable costs you intend to include, but before advertising. Setting contribution after ads to zero gives the formula. This contribution break-even point does not cover fixed overhead unless an explicit allowance is included in the input model.

Use the revenue actually relevant to that margin. Taxes collected for another party, refunds, shipping subsidies and payment fees can change the usable contribution. A reported conversion value that differs from collected revenue should not be inserted without adjustment.

Worked example

Revenue of 800 at a 25% pre-ad contribution margin leaves 200 for advertising. Spending 200 produces 4× ROAS and zero contribution after ads; spending 250 produces a contribution loss of 50.

What can change the answer

The margin must be positive; zero or negative contribution cannot fund positive ad spend. The table is a simplified contribution model and excludes unlisted fixed costs and causal attribution questions.

Sources & definitions

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