Breakeven MER Calculator
Work out the marketing efficiency ratio your store needs to break even, and the MER that leaves your target net profit.
Your breakeven MER
Enter your net sales and gross margin to see your breakeven MER.
What is breakeven MER?
MER (marketing efficiency ratio) is your store's net sales divided by everything you spend on marketing in the same period. An MER of 4 means every $1 of marketing came with $4 of net sales.
Breakeven MER is the MER at which your gross profit exactly pays for your marketing and your operating expenses. Below it, the store makes a loss. Above it, the store makes a profit. At exactly breakeven, it neither loses nor makes money.
Unlike ROAS, MER counts all of your sales and all of your marketing, so it does not depend on which sales each ad platform says it caused.
How breakeven MER is calculated
The calculator works out your gross profit (net sales × gross margin) and takes away your operating expenses. What is left is the most you can spend on marketing before the store makes a loss, your breakeven marketing spend:
Breakeven marketing spend = net sales − cost of goods − operating expenses
Breakeven MER = net sales ÷ breakeven marketing spend
If you enter a target net profit, the calculator also sets that share of net sales aside and shows the marketing spend and MER that leave it:
MER for your target = net sales ÷ (net sales − cost of goods − operating expenses − target net profit)
If your operating expenses are equal to or higher than your gross profit, no MER breaks even: the store makes a loss before any marketing.
How to use your breakeven MER
- Compare it with your actual MER: net sales divided by total marketing spend over the same period, from Shopify and your ad accounts.
- Aim for the MER for your target, not the breakeven one. Breakeven only pays the bills; the target leaves the profit you planned.
- Use the breakeven marketing spend as a ceiling when you set the month's marketing budget.
- Recalculate when your margin or expenses change, for example after a price change, a new supplier or a new hire.
Worked example
| Net sales | $100,000.00 |
|---|---|
| Cost of goods | $40,000.00 |
| Operating expenses | $20,000.00 |
| Breakeven marketing spend | $40,000.00 |
| Breakeven MER | 2.50 |
| Marketing spend for a 10% net profit | $30,000.00 |
| MER for a 10% net profit | 3.33 |
A store has $100,000 of net sales in a month at a 60% gross margin, so its cost of goods is $40,000 and its gross profit $60,000. Its operating expenses are $20,000.
Breakeven marketing spend = 100,000 − 40,000 − 20,000 = $40,000, so breakeven MER = 100,000 ÷ 40,000 = 2.50. Every $1 of marketing has to come with at least $2.50 of net sales.
To keep 10% of net sales ($10,000) as profit, the store can spend up to $30,000 on marketing, an MER of 3.33.
Frequently asked questions
What is the difference between MER and ROAS?
ROAS divides the revenue an ad platform says its campaigns caused by what those campaigns cost. MER divides all of your store's net sales by all of your marketing spend, so it includes returning customers, email and organic sales, and it does not depend on how each platform attributes sales.
What is a good MER?
One comfortably above your breakeven MER. Breakeven MER depends on your gross margin and operating expenses: a store with a 60% gross margin and low expenses may break even at an MER near 2, while a store with a 30% margin needs a much higher one. Enter a target net profit to see the MER your plan needs.
What counts as marketing spend?
Everything you spend to win and keep customers in the period: ad spend on every platform, agency and freelancer fees, influencer and affiliate payments, and email or SMS tools if you treat them as marketing. Use the same definition every time you compare MER.
What goes into cost of goods sold?
The costs that come with every order: the products, 3PL and fulfilment, the shipping you pay and payment fees. Enter your gross margin after those costs. Operating expenses such as salaries, rent and software go in their own field.
Why does the calculator use net sales?
Discounts, refunds and taxes are not money the store keeps. Net sales (sales minus discounts, refunds and taxes) gives an MER based on the money actually available to pay for costs and marketing.
Which period should I use?
Any period, as long as every number covers the same one. A month suits budgeting; a year smooths out seasonal peaks such as Black Friday.
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