What is break-even ROAS?
ROAS — return on ad spend — is the revenue your ads bring in divided by what you paid for them. A ROAS of 3 means every 1 of ad spend came back as 3 of sales. Break-even ROAS is the point where that revenue exactly covers the product, the delivery, the fees and the ads themselves: the order earns nothing and costs nothing.
It is the most useful number to know before you open an ad account, because it turns a vague question — is this campaign working? — into a line you can check every morning. Above the line, every order adds profit. Below it, the platform may still report healthy-looking sales while each one quietly costs you money.
The line is different for every product. A candle sold at a 70% margin can live with a ROAS that would sink a store selling electronics at 15%. That is why a single rule of thumb such as “aim for ROAS 3” misleads more stores than it helps.
The break-even ROAS formula, step by step
The calculator above works through five steps. You can do the same on paper:
- Start from the price the customer pays. If it includes VAT, divide it by 1.2 for a 20% rate: that VAT belongs to the tax office, not to you.
- Subtract the cost of goods: what you pay the supplier or the factory for one unit.
- Subtract shipping and packaging for one order, then the payment fee (a percentage of the price charged) and the expected refunds (your refund rate times the net price).
- Subtract any other per-order cost: an app that charges per order, a packaging insert, a fulfilment fee. What remains is the money one order leaves for advertising.
- Divide the net price by that remaining amount. The result is your break-even ROAS.
In one line: break-even ROAS = net price ÷ (net price − all per-order costs). Since margin is what is left divided by the net price, it is also simply 1 ÷ margin. The remaining amount has a second name worth remembering: it is your maximum CPA, the most you can pay in ads to win one order without losing money.