Break-Even ROAS Calculator
Table of Contents
- What is Break-even ROAS?
- Why Break-even ROAS matters for ecommerce
- How the calculator works
- Basic vs Advanced mode
- Break-even ROAS vs Target ROAS
- What is a “good” ROAS?
- How to improve ROAS profitability
- FAQ
- What is break-even ROAS?
- How do I calculate break-even ROAS?
- What happens if my ROAS is below break-even?
- Is 3x ROAS good for ecommerce?
- Do returns affect break-even ROAS?
- Does ROAS include product costs?
- Should I optimize for ROAS or profit?
- What’s the difference between break-even ROAS and target ROAS?
Break-even ROAS answers one simple question: What ROAS do I need to avoid losing money on ads? If you know that number, you can scale with confidence, set realistic goals, and spot unprofitable campaigns fast.
What is Break-even ROAS?
Break-even ROAS is the minimum return on ad spend required to cover all costs included in your calculation (product costs, fees, logistics, and—optionally—returns). It’s the ROAS threshold where profit is exactly zero.
In practice: if your break-even ROAS is 2.2, you must earn at least $2.20 in revenue for every $1 spent on ads to avoid losing money.
First compute your operating margin (the share of revenue available to cover advertising). Then:
Break-even ROAS = 1 / Operating Margin
This is why break-even ROAS is so powerful: it converts your business economics into a clear advertising benchmark.
Why Break-even ROAS matters for ecommerce
Without break-even ROAS, it’s easy to increase budget on campaigns that look “busy” but are quietly unprofitable.
Your break-even ROAS defines the floor. Your target ROAS should be above it to leave room for volatility and growth.
Once you know your floor, you can judge whether a ROAS dip is acceptable or a warning sign.
Improving margin, reducing fees, cutting return losses, or raising AOV all lower break-even ROAS and improve profitability.
How the calculator works
The calculator estimates your operating margin—the portion of revenue available to spend on ads—then converts it into break-even ROAS.
| Input | What it represents | Why it matters for ROAS |
|---|---|---|
| Total Revenue | The revenue you’re evaluating (total or per order). | ROAS is revenue-based, so this anchors all calculations. |
| Cost of goods sold (COGS) | Product cost (what the item costs you). | Lower margins require a higher ROAS to break even. |
| Logistics | Shipping/packing/storage per order (or per revenue model). | Operational costs reduce the margin available for ads. |
| Transaction fees (%) | Payment processor / marketplace fees. | Fees reduce your effective margin and raise break-even ROAS. |
| Return rate (%) | Share of orders that get returned. | Returns can destroy profit even if ROAS looks “good”. |
| Loss per return (%) (Advanced) | How much revenue you lose when a return happens. | Captures real-world return impact (shipping, damage, refunds). |
Basic vs Advanced mode
| Mode | Includes | Best for |
|---|---|---|
| Basic | COGS, logistics, transaction fees, return rate (simple assumption). | Quick benchmarks and fast validation of ROAS expectations. |
| Advanced | Everything in Basic + loss per return and per-transaction modeling. | Brands with meaningful returns, variable fulfillment costs, or tight margins. |
Advanced mode can also surface related metrics like Max CPA (the maximum you can pay per acquisition while still breaking even), which helps translate ROAS targets into actionable bid/CPA limits.
Break-even ROAS vs Target ROAS
Break-even ROAS is the minimum required to avoid losses. Target ROAS is what you aim for to generate profit and withstand volatility.
| Metric | What it means | How to use it |
|---|---|---|
| Break-even ROAS | The profit = 0 threshold. | Use as a hard floor. If ROAS drops below it, campaigns are unprofitable. |
| Target ROAS | Your profitability goal (profit & growth). | Set above break-even to allow for day-to-day swings and scaling. |
| Safety gap | How much room you have between target and break-even. | Small gap = fragile economics. Larger gap = safer scaling. |
What is a “good” ROAS?
A “good” ROAS depends on your margin structure. A ROAS of 3x can be excellent for one store and unprofitable for another. The right way to judge ROAS is relative to your break-even ROAS.
- Below break-even: unprofitable (you’re paying more in ads than your margin can cover).
- Near break-even: fragile (small fluctuations can wipe out profit).
- Comfortably above break-even: scalable (you can absorb volatility and grow).
Instead of asking “Is 3x ROAS good?”, ask: “How far above my break-even ROAS am I?”
How to improve ROAS profitability
If your break-even ROAS is too high, you have a few levers. Even small improvements can significantly lower the minimum ROAS required.
- Raise prices (carefully) or improve product mix
- Negotiate COGS or shipping rates
- Reduce transaction fees where possible
- Improve sizing/fit information and product pages
- Reduce damage with better packaging
- Adjust return policy and workflows
- Bundles, upsells, cross-sells
- Free shipping thresholds
- Better merchandising and offers
- Faster site, better trust signals
- Clearer product messaging
- Smoother checkout flow
FAQ
What is break-even ROAS?
Break-even ROAS is the minimum ROAS required to cover your costs. If your ROAS is below break-even, your campaigns are unprofitable. If it’s above break-even, you have margin available to generate profit.
How do I calculate break-even ROAS?
First estimate your operating margin (the share of revenue available for ads). Then use: Break-even ROAS = 1 / operating margin. For example, a 40% operating margin implies a break-even ROAS of 2.5.
What happens if my ROAS is below break-even?
A ROAS below break-even means your advertising cost is higher than the margin available from your sales. In other words, you are paying too much for the revenue generated and each incremental dollar spent on ads increases losses.
Is 3x ROAS good for ecommerce?
It depends on your margins and costs. For some stores, 3x is profitable and scalable. For others with low margins or high return losses, 3x may be close to break-even. The best benchmark is your own break-even ROAS.
Do returns affect break-even ROAS?
Yes. Returns reduce your effective operating margin, which increases your break-even ROAS. Advanced mode lets you model return rate and loss per return so your ROAS benchmark reflects real-world profitability.
Does ROAS include product costs?
ROAS itself is simply revenue ÷ ad spend and does not include costs. This calculator combines your cost structure (COGS, fees, logistics, returns) to determine what ROAS you need for those costs to be covered.
Should I optimize for ROAS or profit?
Profit is the goal. ROAS is a useful control metric, but it should be judged against break-even ROAS and your growth objectives. If optimizing for higher ROAS reduces volume too much, you may sacrifice total profit.
What’s the difference between break-even ROAS and target ROAS?
Break-even ROAS is the minimum required to avoid losses. Target ROAS is the ROAS you aim for to achieve profit and provide a buffer against volatility. A healthy business typically targets a ROAS comfortably above break-even.