Chartered Financial Analyst specializing in marketing ROI and advertising spend models.
Find out how many sales (conversions) your ad campaign needs to generate to cover its cost. Enter any three variables—Total Ad Spend, Avg. Order Value, Avg. COGS, or Number of Conversions—to solve for the fourth.
Ad Campaign Breakeven Calculator
Ad Campaign Breakeven Formula
The breakeven formula for an ad campaign finds the number of conversions (Q) needed for your total revenue to equal your total ad spend plus the cost of goods sold.
Q = F / (P – V)
Solve for Total Ad Spend (F):
F = Q * (P – V)
Solve for Avg. Order Value (P):
P = (F / Q) + V
Solve for Avg. COGS (V):
V = P – (F / Q)
Variables Explained
- Total Ad Spend (F): The fixed cost of your campaign. This is your total budget (e.g., PPC spend, media buy).
- Avg. Order Value (AOV) (P): The average revenue you receive from one conversion (Total Revenue / Total Conversions).
- Avg. COGS per Order (V): The average variable cost to produce and fulfill one order (materials, shipping, direct labor).
- Breakeven Conversions (Q): The number of sales you must achieve to reach $0 in operating profit from the campaign.
Related Calculators
- ROAS (Return on Ad Spend) Calculator
- CPA (Cost Per Acquisition) Calculator
- Customer Lifetime Value (CLV) Calculator
- Ad Budget Calculator
What is an Ad Campaign Breakeven Point?
An **Ad Campaign Breakeven Point** is the number of conversions (sales) required to make back your entire ad budget. At this point, your profit is $0. Every conversion *after* this point is true profit. It’s the most basic measure of a campaign’s success.
This is critical because a 100% “Return on Ad Spend” (ROAS) is almost never the breakeven point. If you spend $100 on ads and make $100 in revenue (100% ROAS), you have still lost money, because you had to pay for the products you sold (COGS).
Your **Contribution Margin** (P – V) is the profit you make on each sale *before* accounting for ad spend. Your ad campaign’s goal is to generate enough of these contribution margins to pay for itself (your Fixed Cost, F). This calculator finds the exact number of sales needed to do that.
How to Calculate Ad Campaign Breakeven (Example)
Let’s calculate the breakeven point for an e-commerce store’s new Google Ads campaign.
-
Identify Ad Spend (F):
The store decides to spend $5,000 on the campaign. This is the fixed cost.
-
Identify Avg. Order Value (P):
On average, a customer spends $120.00 per order.
-
Identify Avg. COGS (V):
The cost of goods (materials, packaging) for that $120 order is $40.00.
-
Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per sale: $120.00 (P) – $40.00 (V) = $80.00.
Next, divide the ad spend by this margin:
Q = $5,000 / $80.00 = 62.5 -
Conclusion:
The campaign must generate 63 sales (rounding up) to cover the $5,000 ad spend. The 64th sale will be the first profitable one.
Frequently Asked Questions (FAQ)
Breakeven ROAS tells you the ROAS you need to achieve to cover both ad spend and COGS. The formula is: AOV / (AOV – COGS). In the example above, it would be $120 / ($120 – $40) = 1.5. This means you need a 1.5 ROAS (or 150%) to break even.
Yes. Your (F) should be your *total* fixed investment. If you pay an agency a $1,000 flat fee to manage the $5,000 ad spend, your (F) is $6,000, not $5,000.
It’s the same logic. (F) is your ad spend. (Q) is “Breakeven Leads.” (V) is $0 (or any cost per lead, like a call center). (P) is your “Value per Lead” (e.g., average Customer Lifetime Value * Lead-to-Sale Conversion Rate).
Work backward. If you know your AOV (P), COGS (V), and you have a sales goal (Q), you can solve for (F). This tells you the *maximum* you can spend on ads to achieve that sales goal while still breaking even. `F = Q * (P – V)`.