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What is Break-even ACoS?

Break-even ACoS is the advertising cost of sale at which an ad-driven sale produces zero profit. It is mathematically identical to your gross margin percentage.

Why it matters

Calculate it by subtracting your all-in cost per unit — landed cost of goods, marketplace referral fee and fulfilment fee — from your selling price, then dividing that gross profit by the selling price.

The most frequent error is leaving the referral fee out of the cost side. Sellers who do typically overstate their break-even by around 15 percentage points, then wonder why a campaign they believed was profitable lost money.

Target ACoS is break-even minus the net margin you want to keep. Because both are percentages of the same selling price, they subtract directly: a product with a 40% break-even, advertised at 25% ACoS, nets 15%.

Related

Terms that come up alongside this one

ACoS
ACoS is advertising spend divided by the revenue that advertising generated, expressed as a percentage. An ACoS of 25% means you spent $25 on ads for every $100 of ad-attributed sales.
TACoS
TACoS is advertising spend divided by total revenue — organic and ad-driven combined — rather than by ad-attributed revenue alone. It shows whether advertising is growing the business overall.
Referral fee
A referral fee is the percentage of the total sale price a marketplace takes as commission. On Amazon it is typically 15%, though it varies by category from 8% to 45% and is subject to a minimum per item.

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