Selling & running a business
ROAS, MER, CAC and break-even ROAS explained
Use advertising metrics together instead of optimizing one ratio in isolation.
The useful formula
ROAS is attributed revenue divided by ad spend. MER compares ad spend with total business revenue. CAC divides spend by new customers; CPA and CPL use orders and leads.
What belongs in the inputs
Keep attribution windows and periods consistent. Orders, leads, customers, revenue, and spend should describe the same market and time range.
How to use the result
Break-even ROAS is approximately one divided by gross margin as a decimal. It is a planning boundary, not a profit guarantee, because overhead, returns, and cash timing remain.
Make the right call
The same campaign can look good by one metric and weak by another
Use a fictional period with spend 1,000, attributed revenue 4,000, total revenue 5,000, 50 orders, 40 new customers, 100 leads, 500 clicks, 50,000 impressions and a 40% gross margin. Keep the market, currency and attribution window consistent.
| Check | Example or action | How to judge the result |
|---|---|---|
| Revenue and spend | ROAS = 4,000 ÷ 1,000 = 4×. This tool’s MER = 1,000 ÷ 5,000 = 20%. | Some sources call the inverse, revenue ÷ spend = 5×, “MER”. Always state the formula before comparing reports. |
| Orders are not new customers | CPA = 20; advertising-only CAC = 25; CPL = 10; CPC = 2; CPM = 20. | Total customer-acquisition cost can also include staff and other sales/marketing costs. This tool only divides the spend you enter. |
| A planning threshold | Break-even ROAS = 1 ÷ 0.40 = 2.5×; order/click conversion = 10%. | The threshold ignores costs outside the entered margin. A ROAS above 2.5× is not a guarantee of net profit or causal ad impact. |