Every product test ends with the same question: is this campaign making money? Ads Manager will happily show you a ROAS of 2.1 and let you decide whether that's good. Whether it's good depends entirely on your product's economics, and two numbers answer it: break-even CAC and break-even ROAS.
Work them out before you launch, and you'll know on day one whether a result is a winner or a slow leak.
Step 1: Contribution per order
Everything starts with what one order leaves you before advertising:
Contribution = Retail price − Landed cost − Payment fees − Platform fees − Returns allowance
- Landed cost is the supplier price plus shipping to your customer. See landed cost.
- Payment fees are typically a percentage plus a fixed amount per order. We use 2.9% + $0.30 in the examples below.
- Platform fees apply if you sell through a marketplace or a platform that takes a cut of each sale. Zero for a standard store.
- Returns allowance is a share of revenue set aside for refunds and reshipments. We use 3%.
Worked example
A product costs $8.00 on AliExpress with free shipping. You sell it for $24.99.
| Line | Amount |
|---|---|
| Retail price | $24.99 |
| Supplier price + shipping | −$8.00 |
| Payment fees (2.9% + $0.30) | −$1.02 |
| Returns allowance (3%) | −$0.75 |
| Contribution before ads | $15.22 |
That's a 60.9% contribution margin.
Step 2: Break-even CAC
Break-even CAC is simply your contribution. It's the most you can pay in ad spend to win one order and end at exactly zero profit.
Break-even CAC = Contribution per order = $15.22
If your campaign acquires customers for $12, you make $3.22 per order. At $18, you lose $2.78 per order, and scaling makes the loss bigger, not smaller.
Step 3: Break-even ROAS
Ad platforms report return on ad spend, not CAC, so convert:
Break-even ROAS = Retail price ÷ Break-even CAC = $24.99 ÷ $15.22 = 1.64
Any ROAS above 1.64 on this product is profitable at the order level. Below 1.64, you're paying to ship products.
This is why "a 2.0 ROAS is good" is meaningless advice. For this product, 2.0 is comfortably profitable. For a product with thinner margins it can be a loss, as the next section shows.
How margins move the break-even line
Same fees, different products:
| Supplier cost | Retail | Contribution | Break-even CAC | Break-even ROAS |
|---|---|---|---|---|
| $8.00 | $34.99 | $24.63 | $24.63 | 1.42 |
| $8.00 | $24.99 | $15.22 | $15.22 | 1.64 |
| $8.00 + $2.50 shipping | $24.99 | $12.72 | $12.72 | 1.96 |
| $15.00 | $29.99 | $12.92 | $12.92 | 2.32 |
The last row is the trap. A $15 product sold at $29.99 needs a ROAS of 2.32 just to break even. Most new campaigns don't reach that during testing, so the product looks like a failure even when the ads are doing their job. The real problem is the markup: at $29.99 it's only 2x the cost, below the 2.5x we use as a default. More on this in how to price dropshipping products.
Step 4: Target CAC (break-even is not the goal)
Break-even means zero profit. To plan a business, set a target net margin and work out the CAC that leaves it:
Target CAC = Contribution − (Retail price × Target margin)
For our $24.99 product with a 15% target margin:
Target CAC = $15.22 − ($24.99 × 0.15) = $11.47, which is a target ROAS of 2.18.
This is the number to judge a scaled campaign against. Break-even ROAS tells you when to stop; target ROAS tells you when to scale. See target-margin CAC.
Compare it with what customers cost
Break-even CAC is only half the picture. The other half is what customers actually cost on your channel. As US planning benchmarks, we use $9.50 for TikTok Ads, $14 for Meta and $17.50 for Google Shopping. These are estimates for planning, not guarantees: your real CAC depends on creative, offer and audience.
A product whose break-even CAC is below the benchmark for your channel has no room to learn. One with a break-even CAC well above it can survive a messy first week. Benchmarks also change by country: see the CAC benchmarks or our article on dropshipping CAC by country.
Five mistakes that make these numbers lie
- Forgetting returns and reshipments. Cross-border returns are rarely sent back; you refund or reship. Leave an allowance even if it feels pessimistic.
- Using average order value for CAC on a single product. If most orders contain one unit, use the one-unit price. Upsells are a bonus, not a plan.
- Ignoring shipping that isn't in the listing price. "Free shipping" on AliExpress often applies to one method only. Price the shipping you will actually use.
- Trusting platform-reported ROAS as truth. Attribution windows and modelled conversions can flatter ROAS. Check it against orders in your store.
- Forgetting taxes in markets that charge them at checkout. In the UK and the EU, VAT on low-value imports is often collected at the point of sale, which comes out of your retail price.
Run your own numbers
You don't need a spreadsheet. The break-even CAC calculator and break-even ROAS calculator use the same formulas as above and the same engine Product Score uses on every scored product. Every product in a Product Score research shows its estimated break-even CAC for your chosen channel and market, so you can drop thin-margin products before they reach a test.
