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Break-Even ROAS Calculator

The ROAS your ads need just to pay for themselves — after tax, cost of goods, shipping, fees and returns — and the target that leaves you the profit you want.

Contribution before ads–
Break-even ROAS–
Break-even CPA–
Target ROAS for your profit–

Figures update as you type. Currency-neutral: use any currency consistently.

Short answer

Break-even ROAS = the order value your ad platform reports ÷ the contribution each order makes before ad spend. Contribution is revenue after tax and returns, minus cost of goods, shipping and fulfilment, and payment fees. If an order reported as 100 contributes 40 before ads, break-even ROAS is 100 ÷ 40 = 2.5×; any reported ROAS below 2.5× loses money on each order.

How the calculator works

  1. Net revenue = order value ÷ (1 + tax rate). Ad platforms usually report order value including VAT or GST; you do not keep the tax.
  2. Revenue kept = net revenue × (1 − returns rate), covering refunds, exchanges and RTO.
  3. Contribution before ads = revenue kept − cost of goods − shipping and fulfilment − payment and platform fees.
  4. Break-even ROAS = order value as reported ÷ contribution before ads.
  5. Break-even CPA = contribution before ads — the most you can pay to acquire one order without losing money on it.
  6. Target ROAS for your profit = order value ÷ (contribution − desired profit share of net revenue).

Worked example

An order reported as 100, including 20% VAT, with cost of goods of 30, shipping of 6, fees of 3% and a 5% return rate:

Step Value
Net revenue (100 ÷ 1.2) 83.33
Kept after 5% returns 79.17
Minus goods 30, shipping 6, fees 3 40.17 contribution
Break-even ROAS (100 ÷ 40.17) 2.49×
Target ROAS to keep 10% of net revenue (100 ÷ (40.17 − 8.33)) 3.14×

A store running a 2× target on this product would lose money on every ad-driven order while the dashboard looked respectable.

Why one target ROAS for the whole store is a mistake

Products with different margins have different break-even points. Run the calculator for your highest- and lowest-margin product groups and the gap is usually large. That is why Shopping and Performance Max should be split by margin band with custom labels — explained in how to set a target ROAS from your margin.

Limits of the calculation

  • It ignores repeat purchases. If first orders lead to profitable repeat orders, you may accept a lower ROAS on acquisition — but only with evidence of lifetime value, not hope.
  • It uses platform-reported order value. If your tracking over- or under-reports, fix that first: see Shopify sales not matching Google Ads conversions.
  • Fixed costs (salaries, rent, software) are not included. Contribution has to cover them too.

What is a good ROAS?

Any ROAS comfortably above your break-even ROAS. There is no universal good number: a 3× ROAS is profitable on a high-margin product and loss-making on a low-margin one.

Is break-even ROAS the same as 1 ÷ margin?

Yes, when margin is measured as contribution before ads divided by the revenue the platform reports. The calculator does that conversion for you, including tax and returns.

Frequently asked questions

What is the difference between ROAS and POAS?

ROAS divides revenue by ad spend; POAS (profit on ad spend) divides gross profit by ad spend. A POAS above 1 means ads paid for themselves after product costs.

Should my target ROAS equal my break-even ROAS?

Only if you are deliberately buying growth at zero profit. Most stores set the target above break-even to leave profit, and below it only for proven repeat-purchase customers.

Related

Glossary

ROAS, MER, POAS and more, in plain English.

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