Break-Even ACoS on Amazon UK: How to Work It Out Per Product

Break-even ACoS is the highest advertising cost of sales a product can carry before an ad-attributed sale stops making money. If you run Amazon ads on more than a handful of products, it is the number that tells you which campaigns are safe to scale and which are quietly losing you money. The catch is that it is different for every product, so one account-wide target is almost always wrong.

What break-even ACoS actually is

ACoS is advertising spend divided by the sales Amazon attributes to those ads. Break-even ACoS is your profit margin before advertising, expressed as a share of the selling price. If a product keeps 37% of its price after every other cost, you can spend up to 37% of that price on ads and still break even on the sale. Spend less and the sale makes money, spend more and it loses money.

UK agencies that publish on this topic make the same point: work it out for each product, not once for the whole account, because a product with a 40% margin and one with a 15% margin need completely different targets.

How to work it out, step by step

• Start with the selling price. Decide whether you are working with the price including VAT or excluding it, and use the same basis throughout.
• Take off the cost of the product, including inbound freight and any prep.
• Take off the Amazon referral fee and your fulfilment cost (FBA fees, or your own shipping and packaging if you fulfil yourself).
• Take off an allowance for returns and refunds, since a refunded sale still cost you the ad click.
• What is left is your profit before advertising. Divide it by the selling price to get break-even ACoS.

A worked example

These figures are illustrative, not Amazon's current rates. Say a product sells for £25 excluding VAT. The product costs £8 landed, the referral fee in this example is £3.75 (15%), and fulfilment is £4. That leaves £9.25 before advertising, which is 37% of the price. Your break-even ACoS is 37%.

Now suppose a campaign runs at 30% ACoS. Every sale still earns about 7% of the price after ads, so it is profitable. A campaign at 45% ACoS loses about 8% of the price on every sale, and scaling it makes the loss bigger.

The UK trap: VAT

Several UK sources stress that break-even ACoS should be worked out on the selling price excluding VAT, because VAT is not your money. The common mistake is to calculate margin on the VAT-inclusive price, which makes every product look more profitable than it is. Check whether the sales figure in your ad reports includes VAT and keep your calculation on one basis.

Where sellers get it wrong

• Using one target for the whole catalogue, so low-margin products overspend and high-margin products are held back.
• Forgetting returns, so a product that looks fine on paper loses money once refunds are counted.
• Using out-of-date costs. Fees, freight and product costs move, and the break-even number moves with them.
• Treating break-even as the goal. For a launch you may accept a loss for a while, and for a mature product you want a target well below break-even.

What to do with the number

Set a target ACoS for each product below its break-even, review the products running above it first, and re-check the figure whenever a fee or cost changes. Doing this for hundreds of SKUs across several marketplaces is where a spreadsheet stops being practical, which is why profit tools calculate it per order and SKU after every fee, shipping cost, refund and ad spend.

What is a good ACoS on Amazon?

There is no single good number. It depends on your margin, so the useful answer is your own break-even ACoS for each product, with a target comfortably below it.

Is break-even ACoS the same as target ACoS?

No. Break-even is the ceiling where a sale makes no profit. Your target should sit below it, with the gap being the profit you want to keep.

Does break-even ACoS include organic sales?

No. ACoS only covers sales attributed to the ads. To see the effect of ads on your whole business, look at TACoS alongside it, which is covered in our guide to ACoS versus TACoS.