Find your break-even ROAS before you scale a single ad
Break-even ROAS is the line between ads that make money and ads that quietly lose it. How to work it out from price, product cost, shipping, fees and returns, with three worked examples and a free calculator.
A campaign shows a ROAS of 2.4 and everyone is happy. Is it making money? Nobody can say from that number alone. A 2.4 ROAS is a fortune for a product that keeps 70% of its price and a slow leak for one that keeps 35%. The number that decides it is your break-even ROAS, and it takes five minutes to work out. Do it before you raise a budget, not after.
If you want the answer without the sums, the free ROAS calculator does all of this in your browser and shows each formula next to its result. The rest of this post is the reasoning, so you can trust the number it gives you.
What break-even ROAS means
ROAS is revenue divided by ad spend. Spend $1,000, bring in $3,000, and ROAS is 3.0. Break-even ROAS is the ROAS where the money an order keeps exactly covers the ads that won it. Above it, the ads add profit. Below it, every sale they bring in costs you money, and scaling makes the hole deeper.
There is a twin number worth knowing: break-even CPA, the most you can pay in ads to win one order and still end at $0. They are the same limit seen from two sides. One is in dollars per order, the other in revenue per ad dollar.
Step 1: what one order keeps before ads
Start with the price a customer pays for an average order and take away everything that order costs you, except ads:
- Product cost. What you paid to make or buy what is in the box.
- Shipping and fulfilment. Postage, packaging, pick and pack.
- Payment and platform fees. Card processing and any marketplace or store cut, usually a percentage of the price.
- Returns. The share of orders that come back, times the price. It is the cost people forget most often.
What is left is the most one order can spend on ads. Call it what the order keeps.
Step 2: the two break-even numbers
- Break-even CPA = what an order keeps before ads.
- Break-even ROAS = price ÷ what an order keeps before ads.
That is the whole formula. Here it is on three real-looking shops.
Example 1: a $60 skincare order
Price $60. Product cost $18. Shipping $7. Payment fees 3%, so $1.80. Returns 5%, so $3.00.
The order keeps $60 − $18 − $7 − $1.80 − $3.00 = $30.20. Break-even CPA is $30.20. Break-even ROAS is $60 ÷ $30.20 = 1.99.
So the campaign at 2.4 is making money here, but not much: roughly 40 cents of revenue per ad dollar above the line.
Example 2: a $45 apparel order with heavy returns
Price $45. Product cost $14. Shipping $6. Fees 3%, so $1.35. Returns 25%, so $11.25.
The order keeps $45 − $14 − $6 − $1.35 − $11.25 = $12.40. Break-even ROAS is $45 ÷ $12.40 = 3.63.
The same 2.4 ROAS loses money on every sale here. The difference is almost all returns: at a 5% returns rate this order would keep $21.40 and break even at 2.10.
Example 3: a $120 order with a thin margin
Price $120. Product cost $80. Shipping $12. Fees 3%, so $3.60. Returns 10%, so $12.00.
The order keeps $120 − $80 − $12 − $3.60 − $12 = $12.40. Break-even ROAS is $120 ÷ $12.40 = 9.68. A ROAS that high is hard to hold at any real volume, which tells you the problem lives in the price or the cost of goods, not in the ads.
| Order | Keeps before ads | Break-even CPA | Break-even ROAS |
|---|---|---|---|
| $60 skincare | $30.20 | $30.20 | 1.99 |
| $45 apparel, 25% returns | $12.40 | $12.40 | 3.63 |
| $120, thin margin | $12.40 | $12.40 | 9.68 |
Step 3: the ROAS you actually want
Break-even means $0 of profit. To keep a margin, set it aside before the ads get their share. Take the margin as a share of the price:
Target ROAS = price ÷ (what an order keeps − margin × price).
For the $60 order and a 10% margin, the profit is $6 an order. That leaves $30.20 − $6 = $24.20 for ads, so the target CPA is $24.20 and the target ROAS is $60 ÷ $24.20 = 2.48. The campaign at 2.4 sits just under that: profitable, but short of the margin you asked for.
And sometimes the margin is out of reach. The $120 order keeps 10.3% of its price. It can never make a 15% margin, even if every visitor arrives for free. When the calculator says a target is not possible, that is the reason.
Read it the way your ad platform writes it
Platforms write ROAS in two styles. Google Ads uses a percentage: its Target ROAS help page turns $5 of sales per $1 of ad spend into a 500% target ROAS. Meta’s ROAS goal uses a multiple, and its example of $110 in purchases from a $100 budget, a 110% return, is entered as 1.100. So the skincare break-even is 1.99 in Meta terms and 199% in Google Ads terms. Same line, different notation.
Two cautions about the ROAS the account shows you:
- It counts sales when they happen. A refund three weeks later does not come off it. That is why returns belong in your break-even, not in the platform number.
- It is the platform’s view of what it caused. Meta defines purchase ROAS as purchase conversion value divided by amount spent, and notes that statistical modelling may be used where some events cannot be counted directly. Compare it with the revenue in your store before you bet a budget on it.
Check a campaign against the line
Once you know what an order keeps, profit after ad spend is one line: revenue × contribution margin − ad spend, where the contribution margin is what an order keeps divided by the price.
For the skincare shop that margin is $30.20 ÷ $60 = 50.3%. A campaign that spent $2,000 and brought in $5,400 kept $5,400 × 50.3% = $2,718, so it made $718 after ads. The same spend with $3,000 of revenue kept $1,510 and lost $490, at a ROAS of 1.50. Both campaigns would look fine in a dashboard that only shows revenue.
Before you scale, check these four things
- Use real costs. Pull product cost and shipping from invoices, not from the price list you set a year ago.
- Use your real returns rate. It moves the break-even more than anything else in apparel and footwear.
- Work each product on its own. A shop-wide average hides the item that loses money on every sale.
- Decide on repeat purchases on purpose. If customers reliably come back, you might accept a first order below break-even. That is a choice about lifetime value, and it should be written down, not discovered.
Do it once, then let it run
Put your numbers into the ROAS calculator and keep the break-even ROAS and CPA next to every campaign you run. Then, if you would rather not rebuild the spreadsheet every Monday, Hermoso runs your marketing on autopilot, and part of that is reading every ad platform you have connected to tell you what to scale, pause and test next, with the numbers behind each call. It never changes a campaign by itself.
Questions people ask
What is a good break-even ROAS?
There is no universal good number, because it depends entirely on your costs. A product that keeps half its price before ads breaks even at 2.0. One that keeps a quarter breaks even at 4.0. Work out your own from price, product cost, shipping, fees and returns.
How do I calculate break-even ROAS?
Subtract product cost, shipping, payment fees and the cost of returns from the price to get what one order keeps before ads. Divide the price by that amount. A $60 order that keeps $30.20 breaks even at a ROAS of 1.99.
Is break-even CPA the same as break-even ROAS?
They describe the same limit. Break-even CPA is the most you can spend in ads per order, equal to what the order keeps before ads. Break-even ROAS is the price divided by that CPA.
Should returns be included in break-even ROAS?
Yes. Ad platforms record a sale when it happens and do not take refunds off later, so the returns have to be allowed for in your break-even instead. A 25% returns rate on a $45 order costs $11.25 per order.