Dropshipping Break-Even Calculator

The maths behind it

Break-even in this model has two forms. Break-even cost per acquisition is the contribution available per order: price − supplier cost − supplier shipping − payment fees − refund provision.

Break-even ROAS is 1 ÷ contribution margin, which converts the same fact into the form ad platforms report.

Both describe the same line: the point at which an additional order adds nothing.

In practice

The $29.99 product contributes $19.82 before advertising, or $17.72 after a refund provision. Break-even cost per acquisition is $17.72.

As a margin that is 59% of revenue, so break-even ROAS is 1 ÷ 0.59 = 1.69.

A campaign at 2.5 ROAS is comfortably profitable; at 1.8 it is thin; at 1.69 it contributes nothing; at 1.4 it loses money on every order while the revenue figure grows.

Knowing 1.69 before launching the campaign is what turns the dashboard number into a decision, and it is a five-minute calculation almost nobody does first.

The limitations

Break-even ignores fixed costs entirely: the store platform, apps, subscriptions and the operator's own time. A business running exactly at break-even ROAS is losing money by the whole fixed base.

It also assumes the refund rate holds. Refund rates in this model are driven by delivery time, and a supplier or route change can move them several points without warning.

Putting it to use

Calculate break-even ROAS before spending anything, and set the campaign target meaningfully above it, commonly 1.3 to 1.5 times break-even, so there is room for fixed costs and profit.

Then recalculate whenever the supplier price, the shipping cost or the refund rate moves. All three are outside your control and all three move.

Testing budget and the second break-even nobody calculates

The break-even above is per product. There is a second one at business level: total contribution across winning products has to cover the testing spend on losing ones.

A seller testing ten products at $150 each spends $1,500 to find perhaps one winner. That winner has to generate $1,500 of contribution before the round is even, which at $5.72 a unit is 262 orders.

That arithmetic is why testing discipline matters more than campaign optimisation in this model. Cutting a failing test at $80 rather than $200 changes the number of winners a fixed budget can find, and it is the single highest-leverage habit in the whole approach.

Break-even at the order level rather than the unit level. Where bundles and upsells are working, the average order contains more than one unit and the break-even acquisition cost is correspondingly higher.

A store with a $42 average order value on the same product has $27 of contribution rather than $17.72, which changes what campaigns are viable by a wide margin.

It is worth calculating break-even in units per day rather than per month, since that is the figure a campaign dashboard shows. Knowing that the business needs four orders a day to cover its fixed costs makes a slow week legible immediately rather than at month end.