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Enter your average order value and variable costs, and this tool derives the marketing efficiency ratio (MER, total revenue divided by total ad spend) your business needs to break even, the target that fits your goals, and a first setting for platform ROAS targets. Free, no sign up, and the formulas stay visible so you can see where every number comes from.
MER is blended. It puts every dollar of revenue over every dollar of ad spend, which means organic, repeat, and email revenue count, and platform attribution does not get a vote. Platform ROAS, by contrast, is the platform reporting on itself, and it is decided in the auction by competition, ad quality, offer strength, and how much volume you push. You discover a deliverable ROAS by running. You cannot derive it from your financials.
A MER target is different. It comes from contribution margin, and the derivation is short.
Contribution margin is what a sale contributes after the costs that only exist because the sale happened. Product cost, shipping and fulfilment, payment and platform fees, returns, and anything else variable. Subtract those from average order value and divide by average order value to get contribution margin as a percentage.
Breakeven MER is 1 divided by that percentage. At a 43% margin, breakeven is roughly 2.3x. Below that line, each incremental ad dollar returns less than a dollar of contribution, and growth consumes the business.
The target sits above breakeven, and the tool lets you set it two ways. Media buyers tend to think in profit per dollar of ad spend. Owners tend to think in margin on revenue. Either one turns into the same target, and the tool shows the equivalent in the other language so both people in the room are looking at one number. A growth position sets that number low and accepts thin contribution for volume. A profit position sets it higher. The calculator turns your choice into a target MER, and shows the equation.
Two brands can run the same ROAS and be in completely different positions. A 70% margin breaks even near 1.4x. A 25% margin needs 4x before the first dollar of profit appears. This is why borrowed benchmark targets never work over the long term, and why the line has to be set from your own margins.
Platform ROAS targets are control knobs, not the truth. The calculator gives a first setting for one platform by scaling the MER target by that platform's attributed share of revenue and its share of spend, on whichever attribution basis you select. It is directional, never exact. Platform attribution overstates and double counts, and if you run several platforms their attributed shares usually add up past 100% of revenue. That is overlapping credit, not coverage, so run the platforms one at a time and read each starting point as a neighbourhood rather than a number. It applies to prospecting campaigns. Brand campaigns are set on impression share and presence, and no margin math produces a brand target.
The operating loop after that is the same one used across the accounts we manage. Set the platform target, run for two to four weeks, and compare blended MER to your target. If MER runs below target, tighten the platform target a step. If MER is at target with volume headroom, loosen a step. Judge every move on MER and contribution dollars, never on the platform's own column. Small steps matter because a large target change tells the bidding system to exit auctions, and volume can fall off quickly.
Most accounts cannot fill every input on the first pass, and the calculator is built for that. Mark anything you don't have as unknown and the outputs become floors, with the direction of error stated. In a field test on a well-instrumented seven-figure account, four of the six cost inputs were not on file anywhere, which is closer to normal than the exception.
Net average order value, product cost, shipping cost, and returns come from order-level store data: subtotal before tax, discounts and coupon amounts, shipping cost before tax, refunded amounts, and line-item cost and quantity where it's recorded. Payment processor fees are on the processor statement, not in the store. Platform and app fees are on billing invoices. Anything else that's variable comes from the owner or the finance lead, and usually from a conversation rather than a system.
If you have none of the per-order costs but know a blended contribution margin, switch the tool to enter the percentage directly. A second field test on an account with no cost data anywhere on file made that the only way to get a usable answer.
Pick the window carefully. Use 30 complete days ending two to three weeks ago, on conversion-date metrics, because a window that ends yesterday understates platform-attributed value while conversions are still landing. Avoid windows with a stock-out inside them, since the relationship between spend and sales inverts while a product is unavailable. And if your ads plausibly influence revenue that isn't in your revenue figure, dealer or wholesale sales for example, your attributed shares will run high.
One caution. Analytics tools sometimes show a zero for returns or a fallback margin applied wherever a per-product cost was never set. Those are defaults, not measurements, and they flatter the result. Mark them unknown.
MER by default divides revenue by ad spend only. Some brands count agency retainers, software, and freelancers as marketing cost, which raises the breakeven. Enter monthly ad spend and monthly fixed marketing costs and the tool shows an all-in breakeven alongside the standard one. Neither definition is wrong; the point is to know which one a number was computed on before comparing it to anything.
Many accounts steer on a breakeven or target figure with no documented derivation behind it. Enter it in the "MER target you currently run" field and the calculator shows where it sits against the derived breakeven and target. Validating an inherited number is a different job from setting a new one, and in the accounts we see it is the more common one.
Breakeven here is incremental, the point where the next ad dollar stops paying for itself. Fixed costs like salaries and rent are outside it, so a business can sit above this line and still lose money overall. Contribution margin is treated as an average across the order mix, when real accounts vary product by product. Conversion lag and cash timing are not modelled. MER is blended by design, which means heavy repeat buying in a season or on a launch day can flatter it while new customer efficiency slips, so watch new customer results separately in those periods. Treat the outputs as a read on where your lines sit, then confirm them against your financials.
There is no universal good MER, because the breakeven line moves with margin. A good MER is one comfortably above your own breakeven, which this tool derives from your contribution margin. Comparing your MER to another brand's is a read on nothing unless the margins match.
MER is total revenue over total ad spend, blended across every channel. ROAS is one platform's reported conversion value over that platform's spend, and it depends on the platform's attribution. MER is the number to judge on. ROAS is the number you steer with.
Breakeven MER equals 1 divided by contribution margin expressed as a decimal. A 40% contribution margin gives 1 ÷ 0.40, a breakeven MER of 2.5x.
Yes. The target is breakeven plus whatever profit you want each ad dollar to return. Set it lower when growth is the goal and higher when profit is, and revisit it when margins or goals change.
This one is built for ecommerce order economics. Lead gen needs the target derived from close rates and customer value instead of order margins. That calculator is next in this series.
The complete walkthrough, from gathering variable costs to adjusting targets without breaking Smart Bidding, is in Craig Graham's article for SEM Dispatch: MER vs ROAS: How to Create an MER Target That Actually Means Something. If you'd like a read on your own numbers, book a discovery call.
Grayvault Consulting Inc.
Paid media and attribution for e-commerce, lead gen, and healthcare brands.
Serving organizations across North America
Based in Victoria, BC.
Founded by Craig Graham
Enterprise Paid Media Strategist
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