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Break-even ROAS: which ROAS do your ads need?

Break-even ROAS = revenue per order (as your ad account reports it) ÷ contribution per order before advertising. For a €49.90 product with typical costs that is 2.82 – not the 1.56 the simple formula 1 ÷ margin suggests. Below it, every order bought with ads loses money.

Enter your price and costs and compare your campaign's ROAS with your break-even and target ROAS.

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The formula

ROAS is revenue divided by ad spend – Google Ads calls the target “Target ROAS”. An order breaks even when the ad cost per order is exactly the contribution the order leaves before advertising. That gives the maximum cost per order (CPA) and the break-even ROAS.

Max. cost per order (CPA)contribution per order before advertising
Break-even ROASrevenue per order ÷ max. CPA
Target ROAS for margin mrevenue per order ÷ (contribution before ads − m × net revenue)
Break-even ACoS (Amazon)1 ÷ break-even ROAS

Why 1 ÷ margin is too optimistic

The popular shortcut divides 1 by the gross margin (price minus product cost). It ignores shipping, payment and marketplace fees, returns and – if your ad account reports revenue incl. VAT – the VAT. In the example below the shortcut says 1.56, the real break-even ROAS is 2.82. A campaign with a ROAS between the two looks profitable but loses money.

How returns change the break-even ROAS

Ad platforms count an order when it is placed. If it comes back, the click, shipping and fees are still paid. Same product, different return rates:

Return rateBreak-even ROASMax. cost per order
0%2.47€20.23
5%2.68€18.64
10%2.93€17.04
20%3.60€13.85

Worked examples: Product for €49.90, revenue reported incl. VAT

Price €49.90 incl. 19 % VAT, purchase price €15.00, shipping €4.90, payment fee 2 % + €0.30, 8 % returns at €5.00, €0.50 other costs.

Revenue per order (as reported)
€49.90
Contribution before ads = max. CPA
€17.68
Break-even ROAS
2.82
Break-even ACoS
35.4%
Target ROAS for 15 % margin
4.20
Shortcut 1 ÷ gross margin (too low)
1.56

Every euro of ad spend has to bring at least €2.82 of reported revenue – and €4.20 if the order should still earn a 15 % margin.

Common mistakes and how to fix them

Mixing VAT bases

Why it matters: Revenue in Google Ads and Meta usually includes VAT; a break-even calculated on net prices is then too low.

Fix: Calculate the break-even ROAS on the same basis your ad account uses.

One ROAS target for the whole shop

Why it matters: Low-margin products need a much higher ROAS – an average hides the loss-makers.

Fix: Set targets per product group based on their own break-even ROAS.

Aiming for break-even

Why it matters: At break-even nothing is left for fixed costs and profit.

Fix: Use the target ROAS for your target margin as the campaign goal.

Frequently asked questions

What is a good ROAS?

One above your break-even ROAS – and above your target ROAS if you want a margin after ads. There is no universal good value: a product with a high contribution can be profitable at a ROAS that would lose money on a low-margin product.

Is ROAS the same as ROI?

No. ROAS compares revenue with ad spend; ROI compares profit with cost. A ROAS of 3 can mean a loss if the contribution per order is small.

How does break-even ROAS relate to ACoS?

ACoS is the inverse: ad spend ÷ revenue. Break-even ACoS = 1 ÷ break-even ROAS – Amazon reports ACoS, Google and Meta report ROAS.

Should I include fixed costs?

Not in the break-even per order – fixed costs do not change with one more order. Cover them with the target margin instead.

Related tools and guides

Check your whole shop in 2 minutes – free

One product, a few numbers, no sign-up: see what really stays per order and what to do next.

Start the free shop check

Sources

Fees, rates and rules change. We check the official sources listed here regularly – the date shows our last check.