Attribution & Analytics
What ROAS Do You Need With a 50% Gross Margin?
At a true 50% margin before advertising, the simple break-even ROAS is:
1 ÷ 0.50 = 2.0x = 200%.
Spend $100 on ads, generate $200 revenue, and 50% margin leaves $100 to cover the advertising.
True contribution is usually lower than headline gross margin
If payment, fulfilment, shipping and returns consume another 10% of revenue, contribution before ads may be 40%. Break-even then rises to 2.5x / 250%.
Target above break-even
A business operating at 200% when 200% is true break-even creates no first-order contribution for overhead or profit. Set a target that reflects what the company needs to retain.
Do not over-protect ROAS
At 50%+ contribution, there may be room to scale at a lower ROAS than the account currently achieves. A 500% campaign at low spend is not necessarily better than a 350% campaign that produces much more profit.
Use margin to define the floor and marginal profit to decide scale.
Not sure if ROAS is telling the full story?
If your business has healthy margins but campaigns are being held back by an unnecessarily high ROAS target, send us an inquiry. We can model the scaling range.