What if my margin varies by product?

Use a weighted average gross margin across your top sellers. If a product mix shift changes your margin by more than 5 points, recalculate your break-even ROAS.

Should I include agency fees in cost?

Not in the gross margin formula — agency fees are overhead, not COGS. But when setting your target ROAS, add overhead to get a true profitability floor (target = break-even × 1.5–2×).

How often should I recalculate?

Anytime COGS changes (supplier price changes, shipping rate increases) or after major promotions that shift your average selling price. Review quarterly at minimum.

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How to Calculate Break-Even ROAS (Formula + Free Calculator)

Learn exactly what break-even ROAS means, how to calculate it with a simple formula, and why your reported ROAS may be hiding losses.

April 19, 20267 min read

Key Takeaways

Break-Even ROAS = 1 ÷ Gross Margin %
A 60% margin brand breaks even at 1.67×; 30% margins need 3.3×
Target ROAS should be 1.5–2× break-even to cover overhead
Recalculate after promos and AOV changes

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What Is Break-Even ROAS?

Break-even ROAS is the minimum return on ad spend you need to cover your product costs. At exactly your break-even ROAS, your ad revenue equals your total cost of goods sold — you're neither profitable nor losing money.

Any ROAS above your break-even point generates profit. Any ROAS below it means you're paying to sell products at a loss.

The Formula

Break-Even ROAS = 1 ÷ Gross Margin %

Where gross margin = (Revenue − COGS) ÷ Revenue. For example, if you sell a product for $100 and your COGS is $40:

Gross margin = ($100 − $40) ÷ $100 = 60% (0.60)
Break-even ROAS = 1 ÷ 0.60 = 1.67×

That means you need at least $1.67 in revenue for every $1.00 spent on ads just to cover your product cost.

Worked Example

Skincare Brand Example

Suppose you run a skincare brand on Shopify. Your top product sells for $75. Your total COGS including packaging and fulfillment is $22.50.

Gross margin = ($75 − $22.50) ÷ $75 = 70%

Break-even ROAS = 1 ÷ 0.70 = 1.43×

Any campaign running at 1.43× ROAS or higher is covering its product costs. At 2× ROAS, you're generating $0.57 in gross profit per dollar of ad spend after COGS — before overhead and operating expenses.

Free Break-Even ROAS Calculator

Enter your selling price and cost price to get your exact break-even ROAS, profit per order, and target ROAS instantly.

Try the free calculator

How to Use It

Once you know your break-even ROAS, use it as a campaign floor — not a target. Here's how:

Set bid strategy floors: In Meta or Google, set a minimum ROAS target 10–20% above your break-even number to leave room for margins.
Evaluate campaigns weekly: Any campaign consistently running below break-even ROAS is unprofitable — reduce budget or pause it.
Account for AOV changes: If you run a sale that lowers your AOV or margin, recalculate your break-even ROAS immediately. Sales can turn a profitable campaign unprofitable overnight.
Include all variable costs: The simple formula above only covers COGS. For a more accurate number, add shipping, payment processing fees, and expected return costs to your cost figure.

Common Mistakes

Using revenue ROAS instead of break-even ROAS as the benchmark. A 3× ROAS looks good until you realize your gross margin is 28% and break-even is 3.57×.

Forgetting shipping and returns. Especially in apparel and footwear, a 20–30% return rate can push your effective cost well above your listed COGS.

Not recalculating after promotions. A 20% sitewide discount changes both your AOV and margin — and your break-even ROAS with it.