Derive ROAS from contribution instead of copying a benchmark
| Boundary | Allowable CAC | Required ROAS | Meaning |
|---|---|---|---|
| Break-even | 40 CU contribution before ads | 100 ÷ 40 = 2.5× | No first-order contribution remains after ads |
| Retain 15 CU | 40 − 15 = 25 CU | 100 ÷ 25 = 4.0× | 15 CU remains on the stated boundary |
| Actual CAC: 30 CU | Below 40 but above 25 | 100 ÷ 30 = 3.33× | Above break-even, below the retained-contribution target |
Reconcile contribution and attribution first
Prerequisites for a comparable campaign review
- Reconcile revenue, product, fulfilment, fee and expected return amounts per acquired order. (not complete)
- Choose the attribution rule, campaign scope and observation period before reading the result. (not complete)
- Match campaign spend and acquired orders to the same period and rule. (not complete)
- Separate first-order contribution from any repeat-purchase scenario. (not complete)
- Set the contribution the order should retain after advertising as an explicit assumption. (not complete)
- Identify inventory, fulfilment, service and cash constraints outside the ratio. (not complete)
Set break-even and target ceilings in order
- Calculate contribution before ads for the attributed order on a consistent boundary.
- Use that amount as the first-order break-even CAC ceiling.
- Subtract the contribution you want to retain after ads to set a lower target CAC.
- Convert each CAC ceiling to a ROAS threshold using the same order revenue.
- Reconcile actual spend and acquired orders under the selected attribution rule.
- Stress-test lower contribution, higher return loss and attribution uncertainty before scaling.
- Check capacity, inventory and cash timing even when the entered campaign clears its target.
Break-even CAC = contribution before ads; target CAC = contribution before ads - required retained contribution
- break-even CAC
- Maximum first-order acquisition cost before contribution reaches zero (currency units per acquired order) — derived from the reconciled order scenario
- contribution before ads
- Order revenue less product, fulfilment, fee and expected return costs (currency units per acquired order) — business record or user scenario
- target CAC
- Acquisition ceiling after preserving the selected contribution amount (currency units per acquired order) — derived scenario
- required retained contribution
- Contribution the user chooses to preserve after advertising (currency units per acquired order) — user scenario
Break-even ROAS = order revenue / break-even CAC; target ROAS = order revenue / target CAC
- order revenue
- Revenue for an acquired order on the selected boundary (currency units per acquired order) — business record or user scenario
- break-even CAC
- Acquisition cost at zero retained first-order contribution (currency units per acquired order) — derived scenario
- target CAC
- Acquisition cost that preserves the selected contribution amount (currency units per acquired order) — derived scenario
A smaller CAC ceiling creates a higher required ROAS. State whether ROAS is shown as a ratio or percentage before comparing reports.
Work a neutral acquisition scenario
From contribution to CAC and ROAS
These values are user assumptions in currency units. They are not a recommended CAC, ROAS or margin.
| Measure | Calculation | Result |
|---|---|---|
| Order revenue | User scenario | 100 |
| Contribution before ads | After product, fulfilment, fees and returns | 40 |
| Required retained contribution | User scenario | 15 |
| Break-even CAC | 40 | 40 |
| Target CAC | 40 - 15 | 25 |
| Break-even ROAS | 100 / 40 | 2.5× |
| Target ROAS | 100 / 25 | 4.0× |
Keep attribution and time-horizon limits visible
- Comparing revenue ROAS across products without reconciling their contribution.
- Mixing spend and acquired orders from different periods or attribution rules.
- Treating repeat purchases as certain or moving future contribution into a first-order result.
- Calling break-even a target without preserving contribution for overhead, risk or growth.
- Scaling a ratio without checking stock, fulfilment, service capacity or cash timing.
Methodology sources
- ROAS and Contribution methodology — Margin101: Product-owned contribution, CAC and ROAS formulas and limitations.
Align first-order contribution and CAC before comparing acquisition
CAC is covered by the first order only to the extent that an aligned first-order contribution boundary remains after product, fulfilment, shipping, platform/payment and expected return loss. Later purchases are a separate cohort-and-retention question; break-even acquisition cost is a ceiling, not a target.
| Step | Entered arithmetic | Decision meaning |
|---|---|---|
| Order revenue | 100 CU | One aligned first order, tax excluded |
| Product cost | 100 − 45 = 55 CU | Entered product-cost boundary |
| Fulfilment and shipping | 55 − 10 = 45 CU | Same order and period |
| Platform/payment fees | 45 − 5 = 40 CU | First-order contribution before expected return loss |
| Expected return loss | 40 − 6 = 34 CU | User-entered completed-cohort expectation |
| Aligned CAC | 34 − 30 = 4 CU | Retained first-order contribution after acquisition |
| Case | Retained first-order contribution | Interpretation |
|---|---|---|
| CAC 20 CU | 34 − 20 = 14 CU | Positive first-order scenario |
| CAC 30 CU | 34 − 30 = 4 CU | Positive but narrower headroom |
| CAC 45 CU | 34 − 45 = −11 CU | Not recovered on the first order |
| Higher fee/return loss | 100 − 45 − 10 − 7 fees − 10 return loss − 30 CAC = −2 CU | The unchanged CAC no longer clears the entered first-order boundary |
Calculate each layer with its registered owner
- Ecommerce Order Profitability Planner
Test order contribution after the full fee stack
- Returns Profit Impact Planner
Test period contribution after returns and recovery assumptions
- ROAS to Contribution Planner
Set target CPA and ROAS from contribution before advertising
- Customer Acquisition Cost Planner
Measure loaded and marginal customer acquisition cost across aligned channels