Break-even ROAS and profitability calculator

How to read these results

ROAS (return on ad spend) measures the revenue generated per dollar spent on ads. Break-even ROAS is the threshold below which a campaign costs more than it earns: it is calculated by dividing the selling price by the margin per order before advertising.

Margin per order is what you keep after cost of goods, shipping and payment fees. It is also the maximum acquisition cost you can pay for a first order without losing money.

The number of orders needed shows how many sales per month cover your fixed costs once ads are paid for. To lower that threshold, the most profitable lever is often bringing back customers you already acquired: a second order costs almost nothing in advertising.

The break-even ROAS formula

Break-even ROAS = selling price ÷ margin per order before advertising. Margin per order is the selling price minus cost of goods, shipping and packaging, and payment fees.

The same formula can be written 1 ÷ margin rate: with a 50% margin, the break-even ROAS is 2; with a 25% margin, it is 4. The lower your margin, the more revenue each ad dollar must bring in.

Two worked examples

Example 1, a $49 product: cost of goods $15, shipping $5, payment fees 2.9% + $0.30, i.e. $1.72. Margin per order: 49 − 15 − 5 − 1.72 = $27.28. Break-even ROAS: 49 ÷ 27.28 = 1.80. Each order can cost up to $27.28 in ads before you lose money.

Example 2, a $30 product: cost of goods $14, shipping $6, payment fees 2.9% + $0.30, i.e. $1.17. Margin per order: 30 − 14 − 6 − 1.17 = $8.83. Break-even ROAS: 30 ÷ 8.83 = 3.40. Same ad platform, same audience, but this store needs almost twice the ROAS to break even.

ROAS, MER and profit: which number to watch?

• ROAS = revenue attributed to ads ÷ ad spend. It judges one campaign or one channel, as reported by the ad platform.
• MER (marketing efficiency ratio) = total store revenue ÷ total marketing spend. It is less precise per campaign, but it does not depend on how each platform attributes sales.
• Profit is what remains after every cost: a campaign above its break-even ROAS is profitable on the first order, one below it only pays off if customers order again.

How to use your break-even ROAS

• Set it as the minimum target in your ad campaigns, then aim above it to leave room for fixed costs and profit.
• Recalculate it whenever a cost changes: supplier price, shipping rates, discount codes or a new Shopify plan.
• Calculate it per product or per collection: a low-margin bestseller can need a much higher ROAS than the store average.
• Count repeat orders: if customers buy again without new ad spend, a first order slightly below break-even can still be profitable over time.

Frequently asked questions

How do I calculate ROAS?

Divide the revenue generated by your ads by what they cost. For example, $5,000 in sales for $1,250 of ad spend gives a ROAS of 4 (often written 4× or 400%).

Is a ROAS of 2 good?

Only if your margin rate is above 50%. A ROAS of 2 means $2 of revenue per $1 of ads: with a 60% margin you make a profit, with a 40% margin you lose money on every order. Compare it with your break-even ROAS above.

What is a good ROAS for ecommerce?

There is no universal good ROAS: it all depends on your margin. A store with a 70% margin is profitable from a ROAS of about 1.4, while a store with a 25% margin needs more than 4. Start by calculating your break-even ROAS, then aim above it to make a profit.

Should I include sales tax or VAT in the selling price?

No. Taxes are passed on to the government: use your price excluding tax to get your real margin. If your ad platforms report revenue including tax, compare it with a break-even ROAS calculated on the tax-inclusive price.

How can I lower my break-even point?

Three levers: increase average order value (bundles, upsells), cut variable costs (shipping, payment fees) and increase the number of orders per customer. An active community in your store brings customers back without extra ad spend.