Break-even ROAS: the formula, with a worked example

The short answer

Break-even ROAS is the order value divided by what is left of that order before ads: order value ÷ (order value − product cost − shipping − payment fee). A $60 order that costs $18 to make, $6 to ship and $2.04 in payment fees leaves $33.96, so it breaks even at a ROAS of 1.77. Below that number every ad dollar loses money.

The formula

Break-even ROAS = order value ÷ (order value − product cost − shipping cost − payment fee)

The part in brackets is what one order leaves you before ads. It is also the most you can pay in ads to win that order without losing money.

A worked example

One order	Amount
Order value, without tax	$60.00
Product cost	−$18.00
Shipping you pay	−$6.00
Payment fee (2.9% + 30¢)	−$2.04
Left before ads	$33.96
Break-even ROAS ($60 ÷ $33.96)	1.77

At a ROAS of 3.1 this order costs $19.35 in ads ($60 ÷ 3.1) and keeps $14.61. At a ROAS of 1.5 it costs $40.00 in ads and loses $6.04.

The short version: one divided by your margin

If you know the share of an order that is left before ads, break-even ROAS is 1 ÷ that share. $33.96 of $60 is 56.6%, and 1 ÷ 0.566 is 1.77.

Left before ads	Break-even ROAS
20% of the order	5.00
25%	4.00
30%	3.33
40%	2.50
50%	2.00
60%	1.67
70%	1.43

Four mistakes that move the number

Using revenue with tax. Tax is not yours. Use the order value without it.
Leaving out shipping you pay. “Free shipping” is a cost on every order.
One number for the whole store. A $60 order with a $34 product breaks even at 3.54, not 1.77. Work it out per product group, or from all real orders.
Forgetting refunds and discounts. Both lower what an order really brings in, so they raise your break-even.

Break-even is not the goal

At break-even you keep nothing, and rent, salaries and software are still unpaid. To keep $10 on this order you need $60 ÷ ($33.96 − $10) = a ROAS of 2.50.

Questions

Is break-even ROAS the same as break-even ROI?

No. ROAS compares revenue with ad spend. ROI compares profit with spend. Break-even ROAS is above 1 for every store that has costs; break-even ROI is 0.

Does break-even ROAS include fixed costs?

Not in the usual formula. It covers the costs that come with each order: product, shipping and payment fees. Add a target profit per order to cover fixed costs.

How often should I work it out again?

Whenever a cost changes: a supplier price, a shipping rate, a discount you run. Each one moves the number.

Check it on your own numbers. The break-even ROAS calculator is free and needs no sign-up. ProfitNod works the same numbers out from your store’s real orders, inside Shopify.

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