What Is Break-Even ROAS?
Break-even ROAS is the minimum return on ad spend you need to cover your product costs and the ads themselves. At exactly your break-even ROAS, the gross profit from your ad revenue (revenue minus cost of goods sold) exactly equals your ad spend — 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
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
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, every $1 of ad spend brings in $2.00 of revenue and $1.40 of gross profit after COGS. Take out the $1 you spent on the ad and you keep $0.40 per ad dollar — 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 calculatorHow 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 10–20% above your break-even number, so small swings don't tip a campaign into a loss. That is the floor you never go below, not your goal: the target you plan around sits higher, at 1.5–2× break-even.
- 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.
Frequently asked questions
Founder, Golden Digital · Partner — strategy + technical
