With the illustrative inputs below, the result is 2.5 × revenue / ad spend.
Try this with your own numbersFormula and worked example
Break-even ROAS = 1 / contribution margin
| Input | Example |
|---|---|
| Contribution margin before advertising | 40 % |
| Calculated result | 2.5 × revenue / ad spend |
Choose reliable inputs
Account for delivery time, review work and when you expect to be paid for each engagement. For this recruitment agency calculation, use time sheets, engagement scopes and invoice ageing and a consistent definition of one placement.
- Sourcing: include the portion belonging to this placement or reporting period, and record where the value came from.
- Screening: include the portion belonging to this placement or reporting period, and record where the value came from.
- Account management: include the portion belonging to this placement or reporting period, and record where the value came from.
Use the same currency for every money input. Do not mix weekly costs with monthly revenue, or count the same expense in both an itemised cost and allocated overhead.
Why is a ROAS above one sometimes unprofitable?
Revenue must also pay delivery costs. At 40% contribution margin, 2.5 times ad spend is needed just to fund that spend.
Assumes attributable sales and a stable contribution margin; fixed costs are excluded.
What if this input changes?
If contribution margin before advertising rises by 10%, this example changes by -0.2273 × revenue / ad spend. This shows the effect of one change; it does not predict what will happen.
Open the calculator, save your baseline, then change the input supported by the least reliable estimate in your records. Compare both scenarios before committing to a price or capacity promise.