# Break Even ROAS Calculator

## Manufacturing/Service Cost

Enter how much it would cost you to manufacture/service (Include delivery charges as well)

## Selling Price

ROAS and BE ROAS Formula

When a company runs an advertising campaign, their primary goal is to generate revenue that exceeds their marketing expenditures. The return on ad spend (ROAS) metric provides insight into how effectively a campaign converts spending into earnings.

ROAS is calculated as the total revenue generated divided by the total cost of running the associated advertisements. For a campaign to be considered financially worthwhile, the revenue and costs must balance out – in other words, the organization needs to fully regain its investment.

Therefore, Setting a target break even ROAS level at the beginning of a campaign allows for smarter planning and management. Having this minimum return goal in mind upfront helps shape important campaign decisions and focuses optimisation efforts on actual results.

## What is a Break Even ROAS Calculator?

A break even ROAS calculator allows marketers & business owners to determine the minimum Return on Ad Spend (ROAS) needed for an advertising campaign to break even financially.

ROAS is a key performance metric that measures the amount of revenue generated for every rupee spent on ads. It reveals how effectively a campaign converts ad spend into sales.

For a campaign to be worthwhile, the revenue it generates needs to at least equal the costs of running the ads. This is the “break even” point where a campaign pays for itself but doesn’t lose or make money.

A break even ROAS calculator helps estimate this critical benchmark number. The marketers input things like the total ad budget, desired profit margin, and average sale value.

The calculator then crunches the numbers to calculate the exact ROAS ratio the campaign must achieve just to break even. It accounts for factors such as costs, margins, and expected conversions from ads into sales.

Armed with this break even ROAS figure, campaign managers have a clear target to aim for. If the real ROAS meets or exceeds this number, the campaign delivered on its basic financial goal. The calculator enables setting strategic objectives focused on fiscal viability.

## 2. How to Calculate Break Even ROAS?

Here are the steps to calculate break even ROAS:

1. Determine your advertising budget. This is the total amount you plan to spend on the campaign.

2. Set your profit margin percentage.

3. Calculate the revenue required to break even. Take your advertising budget and divide it by (100% – your profit margin percentage).

If the profit that you were planning to make by selling a product/service was completely used by advertising to get you customer, you are left with “no profit or no loss” which is also called as break even.

now in the same scenario to calculate Breakeven ROAS we would divide the revnue you would make by profits (which is used in advertising)

To calculate the break even ROAS using this formula, we would need to divide the selling price by the difference between the selling price and manufacturing cost

Formula:

Break Even ROAS = Selling Price / (Selling Price – Manufacturing Cost)

Example 1: if the selling price is \$50 and the manufacturing cost is \$20, the profit per unit sold would be:

Profit per unit = Selling price – Manufacturing cost

Profit per unit = \$50 – \$20

Profit per unit = \$30

To calculate the break even ROAS, we would use the updated formula as follows:

Break Even ROAS = Selling Price / (Selling Price – Manufacturing Cost)

Break Even ROAS = \$50 / (\$50 – \$20)

Break Even ROAS = \$50 / \$30

Break Even ROAS = 1.67

This means that for every dollar spent on advertising, the company needs to generate \$1.67 in revenue to cover both the cost of manufacturing and advertising, without making any profit.

Example 2:

## 3. What are the Factors on which Break Even ROAS Calculation Depends?

The break even ROAS calculation depends on several key factors:

1. Advertising budget: The total amount budgeted to spend on the advertising campaign. This is the main cost input.

2. Profit margin: The percentage of profit above costs that is expected or needed from the campaign. Higher margins mean a higher break even ROAS.

3. Average order value (AOV): The average amount each customer spends in an order. Impacts the number of sales or conversions needed.

4. Conversion rate: The rate at which advertising leads to actual sales. Higher conversion rates lower the break even ROAS.

5. Campaign duration: A longer campaign allows more time to recoup costs through sales over multiple periods.

6. Product/service price: More expensive items or larger order values decrease the sales volume needed for break even.

7. Advertising types: Different channels like social, search or display have varying ability to drive relevant traffic and sales.

8. Seasonality: Factors like holidays could impact consumer behavior and response to ads, influencing conversion rates.

So, the advertiser’s budget, desired margins, site/offer performance metrics, and external variables all feed into the break even ROAS calculation. Proper accounting of these factors leads to accurate minimum ROAS benchmarks.

## 4. What are the Benefits of a Break Even ROAS Calculator?

1. It’s a tool that figures out the lowest ROAS (return on ad spend) you need to earn back what you spent on ads. This helps you set goals for making a profit.

2. You can play with the numbers and see how changing things like your profit margin or cost per sale affects your break even ROAS. This lets you model different situations.

3. The calculator does the hard math for you. You don’t have to calculate complex formulas yourself.

4. It shows if your campaigns are actually making money or not. You can compare your real ROAS to the break even one.

5. Knowing your break even ROAS is key for making smart choices about your ad budgets and spending. The tool makes it easy to figure out.

Overall, the calculator simplifies ROAS and tells you how profitable your ads are. It also helps you make changes and spend smarter for better returns. The complex math is done for you and presented visually. It’s a great tool for maximizing your ad profitability.