The Break-Even ROAS Playbook for 2025: Set Winning Ad Targets Using Contribution Margin, AOV, and CAC

Paid media got pricier and noisier last year, which means guessing at a “good ROAS” is not a strategy in 2025. According to the IAB’s full-year 2024 report, US digital ad revenue jumped to 259 billion dollars, a 15 percent increase that signals intense competition for inventory. At the same time, the 2025 Digital Experience Benchmarks from Contentsquare report a 9 percent rise in cost per visit and a 6.1 percent drop in conversions, which compresses efficiency even further. If you want to scale profitably this year, you need a break-even ROAS that is grounded in your unit economics, not platform averages.

Why break-even ROAS matters more in 2025

Platform and pricing dynamics are shifting. Tinuiti’s Q4 2024 benchmark shows Meta CPMs swinging back to growth, with Instagram CPM up 15 percent year over year in Q4 and overall Meta CPM up 5 percent for the median advertiser, while Google Search CPC rose 7 percent year over year in the same period, based on Tinuiti’s Digital Ads Benchmark Report. In short, the same budget buys fewer efficient clicks.

Break-even ROAS gives you a durable target that adapts to those conditions because it ties your ad efficiency threshold to your contribution margin, average order value, and acquisition cost, not to a moving platform benchmark. That target prevents overbidding when margins shrink and shows where you can safely lean in when margins expand.

The simple, defensible formula

There are two equivalent ways to set a break-even ROAS target that aligns to actual product economics:

1. Profit version: Profit per order equals contribution margin percent times AOV minus CAC. Break-even occurs when Contribution Margin % × AOV minus CAC equals 0. Rearranging gives AOV divided by CAC equals break-even ROAS.

2. Margin version: Because CAC at break even equals Contribution Margin % × AOV, break-even ROAS simplifies to 1 divided by Contribution Margin %.

If your contribution margin is 45 percent, your break-even ROAS is about 2.22. In other words, you must generate 2.22 dollars of revenue for every dollar of ad spend to avoid losing money on the first order.

Two quick definitions to keep the math clean. The Shopify guide to average order value defines AOV as total revenue divided by number of orders. Contribution margin is the portion of revenue left after variable costs like COGS, shipping, payment fees, and returns. Conjura explains that contribution margin is the actionable, product-level measure that accounts for direct selling costs many dashboards miss, including ad spend and fulfillment, in its guide on how to calculate contribution margin for ecommerce brands. Finally, CAC is your effective customer acquisition cost per first order.

A concrete example

Imagine you sell a 60 dollar product. Variable costs per order include 24 dollars COGS, 6 dollars shipping, and 3 dollars payment and marketplace fees, which totals 33 dollars. Contribution margin equals 60 minus 33, divided by 60, which is 45 percent. Your break-even ROAS is 1 divided by 0.45, or 2.22. If your campaigns regularly sit at 1.8, you are paying too much to acquire that revenue, or your variable costs are too high for that price point.

Setting targets with FullyCounted

You can turn this from theory into a working plan in minutes using the free Break-Even and Profit Analysis calculator at FullyCounted. Enter a product name, cost per unit, and selling price. Then add your monthly fixed expenses for rent and utilities, marketing and ads, software and tools, and other overhead. FullyCounted updates results in real time and lets you save analyses or export a report for your planning deck. The calculator is purpose-built for ecommerce and solo operators who do not want to wrangle spreadsheets, and the UI guides you step by step.

If you are unsure which costs are variable versus fixed, the primer on ecommerce fixed vs variable costs with 2025 benchmarks will help you classify shipping, payment fees, and fulfillment correctly so your contribution margin is accurate. If your model includes subscriptions or strong repeat purchase behavior, the article on subscription vs one-time LTV, payback and cash flow explains how to adjust targets so you can break even on first order and recoup CAC on repeat orders with confidence.

Using platform tools without losing the plot

Break-even ROAS is a budgeting and guardrail metric. Inside platforms, you still need to optimize for value. Google describes Target ROAS as a Smart Bidding strategy that “adjusts your bids to try to maximize your conversion value while reaching this target,” as explained in Google’s Target ROAS help article. Set your Target ROAS at or above your break-even ROAS and monitor both revenue and gross margin contribution by campaign. On Meta, ROAS reflects purchase value captured by the pixel or Conversions API, per Meta’s Website Purchase ROAS definition. Use your break-even ROAS as the line you do not cross at the account or campaign level, while still testing creative and audience mixes that can improve AOV and lower CAC.

Practical levers to hit and beat break even

• Lift AOV. Bundles, threshold-based perks, and curated add-ons often move AOV more than discount codes. Because AOV increases improve ROAS and contribution margin simultaneously, they are the cleanest path to profitable scaling.
• Trim variable costs. Negotiate carrier rates, right-size packaging, and review payment processor tiers. Conjura’s discussion of contribution margin highlights how shipping labels, fulfillment fees, and payment charges quietly erode profit, so they deserve frequent review in ecommerce operations.
• Lower CAC with creative and structure. Rotate fresh hooks, test shorter video cuts for Reels and Shorts placements, and segment PMax or Advantage+ for better budget accountability. Tinuiti’s report notes that formats like Reels have gained impression share, which makes creative fit and thumb-stopping openings essential in 2025.
• Price for margin, not just conversion rate. If your break-even ROAS is unreachable in competitive auctions, revisit price before you scale spend.

Benchmarks and guardrails to keep you honest

• Break-even is not a goal, it is a floor. If Contribution Margin % equals 60 percent, your break-even ROAS is 1.67. A profit target might be 2.0 to 2.5 to leave room for fixed costs.
• Fixed costs still matter. Break-even ROAS looks at variable costs and CAC. Use FullyCounted to layer monthly overhead into your plan so you understand the order volume required to cover payroll, rent, and software.
• Channel mix changes the threshold. Retail media, shopping ads, and paid social each have distinct CAC and AOV profiles. Pin a break-even ROAS per channel or per product group rather than one number for your whole account.
• Subscription or strong repeat purchase models can justify a break-even or slight loss on first order. Set your first-order break-even ROAS and track payback windows using the LTV and payback guide.

Ready to put this into practice today? Build your unit economics in the free calculator at FullyCounted, save the scenario, and export a one-pager for your budget meeting. If you are launching your first store, you can get started quickly with Shopify and plug your product numbers into the same model on day one. For ongoing learning, browse the FullyCounted blog, and if you care about data use, review our privacy and terms anytime.