bROAS (Break-even ROAS)

What is bROAS (Break-even ROAS)?

bROAS (break-even ROAS) is the minimum Return on Ad Spend you need so campaigns do not lose money. It is calculated based on margin: the higher your product margin, the lower your bROAS threshold. Using contribution margin (including COGS, discounts, variable shipping/payment costs) gives the most accurate view.

Formulas / Metrics (core types):

• bROAS (gross): 1 ÷ Gross Margin %
• bROAS (contribution): 1 ÷ Contribution Margin % (recommended)
• Contribution Margin %: (Net Revenue − COGS − variable shipping − payment fees − discounts − returns) ÷ Net Revenue
• Safety Margin: Add +10–20% buffer above bROAS to cover operational overhead.
• LTV Link: bROAS only applies to first-order breakeven; consider Lifetime Value for longer-term profitability.

Key idea: A campaign with ROAS 3.0 might look “good,” but if your bROAS is 3.3, you are still losing money. Always evaluate ROAS against bROAS, not in isolation.

Why it matters?

• Profit discipline: ROAS above bROAS = profitable; below bROAS = unprofitable.
• Budget allocation: Clear rule for which campaigns to scale, pause, or fix.
• LTV strategy: Subscriptions or repeat purchase models can justify campaigns below bROAS—but only if retention is proven.

KPIQ Perspective

• User view: “My ROAS looks okay, but am I really breaking even—or losing money?”
• Technical view: KPIQ benchmarks ROAS by channel and campaign, and when margin data is available, calculates bROAS thresholds. It classifies campaigns as Above/Below bROAS, runs what-ifs (e.g., +3pp contribution margin, −2pp discount), and flags data issues (missing returns, incomplete spend allocation). By default, KPIQ focuses on relative ROAS efficiency, and enriches the analysis with bROAS if margin inputs are provided.

Actionable Insights

• ✅ Define your contribution margin (per product/category). Always include returns, discounts, variable fees.
• ✅ Calculate bROAS = 1 ÷ Contribution Margin %. Set thresholds by product or category.
• ✅ Add ROAS vs bROAS as a column in campaign reports—quickly see winners and losers.
• ✅ Scale campaigns well above bROAS; test improvements (AOV, CR, creative) for those close to the threshold.
• ✅ Do not scale campaigns below bROAS unless backed by strong LTV/retention logic.
• ✅ Consider a “safety buffer”: being exactly at breakeven still risks hidden overhead costs.

Practical Example

Baseline: Net Revenue = €100, COGS = €60, variable shipping/fees = €10 → Contribution = €30 → Contribution Margin = 30%

• bROAS = 1 ÷ 0.30 = 3.33

Step 1: Compare Campaigns

• Search Brand ROAS = 5.0 → Above bROAS (+1.67)
• Search Non-Brand ROAS = 2.9 → Below bROAS (−0.43)
• Paid Social ROAS = 3.4 → At risk (+0.07 margin of error)

Step 2: What-if

If you reduce discounts and improve contribution margin from 30% → 33%:

• New bROAS = 1 ÷ 0.33 = 3.03
• Paid Social (ROAS 3.4) becomes safely profitable (+0.37 above bROAS).
• Search Non-Brand (2.9) still remains below threshold → needs AOV/CR improvements.

Step 3: Decision

Scale Search Brand immediately. Test Paid Social with caution. Cut or fix Non-Brand before investing more budget.