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Calculate Your Break-Even ROAS

Not sure what your target ROAS should be? Find the exact return on ad spend you need to cover all costs and start making profit.

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What is Break-Even ROAS?

ROAS stands for Return on Ad Spend. It measures how much revenue you earn for every dollar you spend on advertising. A 3x ROAS means you earn $3 for every $1 in ad spend.

Break-even ROAS is the specific ROAS number where you're neither making money nor losing it. It accounts for your product costs, your ad spend, and any marketing overhead like agency or software fees.

Knowing your break-even ROAS is critical because it turns a vague question (“Is my ROAS good?”) into a concrete, personalized answer. A 2x ROAS might be fantastic for a business with high margins and terrible for one with thin margins.

The formula

Break-Even ROAS=AOVAOV−COGS×(1+FeesAd Spend)\text{Break-Even ROAS} = \frac{\text{AOV}}{\text{AOV} - \text{COGS}} \times \left(1 + \frac{\text{Fees}}{\text{Ad Spend}}\right)
AOVAOV−COGS\dfrac{\text{AOV}}{\text{AOV} - \text{COGS}}

How many dollars of revenue you need per dollar of gross profit

1+FeesAd Spend1 + \dfrac{\text{Fees}}{\text{Ad Spend}}

Adjusts for agency and software overhead on top of ad spend

Worked example

AOV

$100

COGS

$40

Ad Spend

$5,000/mo

Agency Fees

$1,000/mo

Gross Margin=$100−$40=$60\text{Gross Margin} = \$100 - \$40 = \$60
Base ROAS=$100$60=1.67x\text{Base ROAS} = \frac{\$100}{\$60} = 1.67\text{x}
Overhead=1+$1,000$5,000=1.20x\text{Overhead} = 1 + \frac{\$1{,}000}{\$5{,}000} = 1.20\text{x}
Break-Even ROAS=1.67×1.20=2.00x\text{Break-Even ROAS} = 1.67 \times 1.20 = \boxed{2.00\text{x}}

This means for every $1 spent on ads and fees, the business needs at least $2.00 in revenue. At $6,000 total marketing cost ($5,000 ads + $1,000 fees), they need $12,000 in ad-attributed revenue to break even.

How to Calculate Break-Even ROAS

Average Order Value

AOV=Total RevenueNumber of Orders\text{AOV} = \dfrac{\text{Total Revenue}}{\text{Number of Orders}}

Shopify: Analytics > Reports > Average order value

WooCommerce: Analytics > Revenue > Net revenue / Orders

Manual: Total Revenue / Total Orders

Use a rolling average. Don't base it on one unusually good (or bad) week.

Cost of Goods Sold

Add up everything it costs to deliver one order to a customer.

Product/material cost

Packaging materials

Shipping to customer

Payment processing (~2.5-3%)

Platform/marketplace fees

Cost of average returns

Common mistake: forgetting payment processing fees. On a $100 order, that's $2.50-3.00 you're missing.

Monthly Ad Spend

Your total ad budget across all platforms for one month.

Meta Ads: Ads Manager > Account Overview > Amount Spent

Google Ads: Campaigns > Cost column

TikTok Ads: Dashboard > Total Cost

Keep it simple: just the money going directly to the ad platforms. Agency fees go in the separate field.

Agency & Software Fees

Monthly marketing overhead beyond the ad spend itself.

Agency monthly retainer or % of spend

Freelancer management fees

Attribution tools (Triple Whale, Hyros)

Creative tools and subscriptions

If your agency charges a percentage of ad spend, calculate the dollar amount. Example: 15% of $5,000 = $750/mo.

Frequently Asked Questions

It's the minimum return on ad spend where you're not losing money. If your break-even ROAS is 2.5x, you need to generate $2.50 in revenue for every $1 you spend on ads. Below that, you're losing money. Above it, you're making profit.
It depends entirely on your margins. A 3x ROAS might be amazing for a business with 70% margins but terrible for one with 30% margins. That's why break-even ROAS matters more than generic benchmarks. Your target ROAS should be your break-even ROAS plus whatever profit margin you want.
No. COGS should only include costs that scale directly with each order: product cost, shipping, packaging, payment fees. Fixed costs like rent, salaries, and utilities don't change based on how many orders you get. This calculator focuses on variable, per-order profitability.
Use a weighted average based on your sales mix over the last 30-90 days. If 60% of orders are $80 and 40% are $150, your weighted AOV is ($80 x 0.6) + ($150 x 0.4) = $108. For more precision, run this calculator separately for each product category.
A high break-even ROAS usually means tight margins. You can lower it by: raising your prices (increases AOV), negotiating better supplier rates (lowers COGS), offering bundles to increase AOV, reducing packaging or shipping costs, or switching to a lower-cost agency/going in-house.
Your agency and software fees stay the same regardless of how much you spend on ads. At $2,000/mo ad spend with $1,000 in fees, those fees add 50% overhead. At $10,000/mo ad spend, the same $1,000 in fees only adds 10% overhead. So the more you spend on ads, the less your fixed fees inflate your break-even target. This is why scaling ad spend can actually make your campaigns easier to keep profitable, not harder. Note: if you have no agency or software fees, your break-even ROAS stays the same at any spend level.
Break-even ROAS is the floor: the minimum to not lose money. Target ROAS is what you actually aim for. It should be higher than your break-even to account for profit goals and unexpected costs. A common approach is to set your target ROAS 20-50% above your break-even.

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