The break-even ROAS formula
ROAS, or return on ad spend, is revenue divided by ad spend. Your break-even ROAS is the ROAS at which the ad cost uses up exactly the profit an order leaves before advertising. At that point the sale neither makes nor loses money.
Start with your margin before ad spend: what is left of the order value after product costs, shipping, payment fees, refunds and other order costs, as a share of the order value. Use the order value without sales tax or VAT, because that tax is not yours to keep. Accountants call a similar number the contribution margin. Break-even ROAS is 1 divided by that margin.
Profit before ad spend = order value (excluding sales tax or VAT) − product cost − shipping − payment fees − refunds − other costs
Margin before ad spend = profit before ad spend ÷ order value
Break-even ROAS = 1 ÷ margin before ad spend = order value ÷ profit before ad spend
Break-even cost per purchase = profit before ad spend
A store that keeps 50% of each order before ads breaks even at 2.0x ROAS. At a 25% margin it needs 4.0x, and at 20% it needs 5.0x. The thinner the margin, the higher the ROAS your ads have to reach.
Worked example: from order costs to break-even ROAS
Illustrative calculation, not a customer result. Take 100 orders with an average order value of $50.00, or $5,000 in revenue. Each order carries $20.00 in product costs, $3.50 in shipping, $2.00 in payment fees (3.4% plus $0.30) and $2.50 in refunds (5% of revenue).
That is $28.00 of costs per order and $2,800 for all 100 orders. Profit before ad spend is $22.00 per order, or $2,200 in total: a margin of 44%.
Break-even ROAS is $50.00 ÷ $22.00 = 2.27x, or 227%. Your ads can cost up to $22.00 per order, and they have to bring in at least $2.27 of revenue for every $1 you spend.
| Line | Per order | 100 orders |
|---|---|---|
| Order value | $50.00 | $5,000 |
| Product costs | −$20.00 | −$2,000 |
| Shipping | −$3.50 | −$350 |
| Payment fees | −$2.00 | −$200 |
| Refunds | −$2.50 | −$250 |
| Profit before ad spend | $22.00 | $2,200 |
| Margin before ad spend | 44% | 44% |
| Break-even ROAS | 2.27x | 2.27x |
| Most ad spend without a loss | $22.00 | $2,200 |
If those orders came from $1,000 of ads, the ROAS would be 5.0x, well above break-even: $1,200 remains after the ad cost, and POAS is 2.2x. The ROAS vs POAS guide works through the same numbers.
Break-even ROAS and POAS mark the same point
POAS, or profit on ad spend, divides profit before ad spend by ad spend. With WeProfit’s formula, 1.0x POAS means profit before ad spend exactly covers advertising.
POAS = profit before ad spend ÷ ad spend = margin before ad spend × ROAS
So a campaign that runs exactly at your break-even ROAS has a POAS of 1.0x. Above break-even ROAS, POAS rises above 1.0x and profit remains after the ad cost. Below it, POAS drops under 1.0x.
Use break-even ROAS to set a floor before you spend, and POAS to check afterwards whether the ads covered their cost.
What a good ROAS depends on
There is no single good ROAS for every store. A ROAS is good for you when it is above your break-even ROAS, with room left for the costs this calculator leaves out. These are the things that move it:
- Your margin before ad spend. Product costs, shipping, payment fees and refunds set the break-even point, so two stores with the same ROAS can end up with very different profits.
- The revenue behind the ROAS. Ad platforms report the revenue they attribute to their own ads, and more than one network can count the same order.
- Repeat purchases. Some stores accept a first order close to break-even because customers buy again. The ROAS of the first order does not show that.
- Your goal for the campaign. A launch or a test can run near break-even for a while; a campaign that has to earn money needs a target above it.
What the calculator leaves out
The calculator counts the costs that come with each order. Sales tax or VAT is not part of revenue here: enter the order value without it, and compare the break-even ROAS with a ROAS that leaves it out too. The calculator also leaves out costs that do not grow with every order, such as rent, salaries, software subscriptions, income taxes and other overhead. A campaign at break-even ROAS pays for its orders and its ads, not for the whole business.
It also works with averages. Real orders vary in size, product mix and refunds, and a profitable historical campaign does not guarantee that its next dollar of spend will earn the same return.
From averages to your real order costs
Averages are a starting point. WeProfit puts ad spend, product costs, refunds, fees and shipping next to revenue, and its POAS compares profit before advertising costs with ad spend. Product costs can be entered or estimated, and WeProfit labels their coverage as exact, partial or estimate.
See how WeProfit profit analytics calculates net profit, or compare plans and pricing. You can try WeProfit free for 14 days.
Break-even ROAS questions
What is a good break-even ROAS?
A low one, because it means each order keeps more of its value before ads. A store with a 50% margin breaks even at 2.0x, while a 20% margin needs 5.0x. The ROAS to aim for is your break-even ROAS plus room for the costs the calculation leaves out.
Does break-even ROAS include shipping and payment fees?
It should. Every cost you pay per order lowers the profit before ad spend and raises the break-even ROAS. This calculator subtracts product costs, shipping, payment fees, refunds and any other per-order costs you enter.
What is the difference between break-even ROAS and target ROAS?
Break-even ROAS is the floor where a sale neither makes nor loses money after the ad cost. Target ROAS is the goal you set for a campaign, and it sits above break-even if you want a profit after ads. Google Ads asks for target ROAS as a percentage, so a break-even ROAS of 2.27x is 227%.
How do I calculate break-even ROAS from a margin?
Divide 1 by your margin before ad spend, written as a decimal. A 40% margin gives 1 ÷ 0.40 = 2.5x, and the 44% margin of the worked example gives 2.27x.
What if my margin is zero or negative?
Then each order leaves nothing, or loses money, before any ad spend, so no ROAS can break even. Lower the product, shipping or other costs, or raise the order value, before you put ad budget behind it.