Unit Economics
Break-even ROAS for a Product
Product
Costs per unit
Costs as a % of the selling price
Profit target
Your ROAS targets
How the Unit Economics Calculator works
Enter a product's selling price and what it costs to make, ship and sell one unit. The calculator works out the unit margin, the most you can spend on ads per unit sold, and the ROAS you need to see in Ads Manager to break even or to keep your net target on each unit.
- Cost of delivery
- COGS, shipping and receiving, pick-and-pack and shipping and fulfillment per unit, plus transaction fees, returns and discount, each taken as a % of the selling price.
- Unit margin
- Selling price minus the cost of delivery.
- Max ad spend per unit (CAC)
- Unit margin minus the profit you want to keep per unit. This includes the 18% GST on ad spend.
- Spend in Ads Manager
- CAC ÷ 1.18: the same spend without GST, as Ads Manager shows it.
- ROAS needed in Ads Manager
- Selling price ÷ spend in Ads Manager. With the profit kept at 0 this is the break-even ROAS; with your net target it is the target ROAS.
Frequently asked questions
What is break-even ROAS?
Break-even ROAS is the return on ad spend at which a sale from ads makes no profit and no loss: the ad spend uses up the whole unit margin. Below it, each sale from ads loses money. Above it, each sale keeps some profit.
How do I calculate break-even ROAS?
Work out the unit margin (selling price minus every cost of delivering one unit), divide it by 1.18 to take out the 18% GST on ad spend, then divide the selling price by the result. In the example, a ₹1,499 product with a unit margin of ₹689.20 can spend ₹584.07 per sale in Ads Manager, so its break-even ROAS is 1,499 ÷ 584.07 = 2.57x.
What is the difference between break-even ROAS and target ROAS?
Break-even ROAS keeps ₹0 profit per unit after ad spend. Target ROAS keeps your net target per unit, so it is higher whenever that target is above ₹0. In the example, keeping ₹100 per unit cuts the ad spend per unit from ₹689.20 to ₹589.20, and the ROAS needed in Ads Manager rises from 2.57x to 3.00x.
Why does the calculator divide ad spend by 1.18?
Ad spend on Meta and Google in India carries 18% GST. The calculator counts that GST as part of what you spend per unit, but Ads Manager reports spend without GST. Dividing by 1.18 gives the ROAS you will see in Ads Manager.
Which costs go into unit economics?
Everything it takes to sell one unit: cost of goods sold, shipping and receiving stock into your warehouse, pick-and-pack, shipping and fulfillment to the customer, payment gateway fees, the share of sales lost to returns and your average discount. Ad spend is left out, because the calculator works out how much of it each unit can carry.