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Anthony McGrath, freelance Google Ads specialist in Leeds

ROAS1.8xLosing money on every £1 of ads
Wasted spend
38%
Sales tracked
61%
Cost per sale
£46
Profit after ads
-£1,240

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      Breakeven ROAS: the one number to know before you spend on ads

      Short answer

      Breakeven ROAS is the return on ad spend at which your ads exactly pay for themselves after product costs, delivery and fees. Work it out by dividing your average order value by the profit per order before ad spend. If you keep £25 of a £60 order before ads, your breakeven ROAS is 60 ÷ 25 = 2.4x.

      Key points

      • ROAS is revenue divided by ad spend. On its own it does not tell you if you made money.
      • Breakeven ROAS = average order value divided by profit per order before ads.
      • Set target ROAS above breakeven by the profit you want to keep.
      • Low-margin products and big discounts raise your breakeven ROAS.
      • The free ROAS calculator on this site works it out for you.

      ROAS, return on ad spend, is revenue divided by ad spend. Ad platforms love it because it is easy to show. The trouble is that a "good" ROAS means nothing until you know what you need to break even.

      How to work out breakeven ROAS

      Take an average order and subtract everything except advertising:

      • The cost of the products.
      • Delivery and packing.
      • Payment fees.
      • VAT, if your revenue figures include it.

      What is left is your profit per order before ads. Then:

      Breakeven ROAS = average order value ÷ profit per order before ads

      So if your average order is £60 and you keep £25 before ads, your breakeven ROAS is 2.4x. Below that, every sale from ads loses money. Above it, you make some.

      Why it changes everything

      Once you know your number, decisions get simpler:

      1. Campaign targets. Set your target ROAS above breakeven by the profit you want to keep.
      2. Which products to advertise. Low-margin products have a higher breakeven ROAS. Some should not be advertised at all.
      3. Discounts. A 20% discount can push your breakeven ROAS up sharply, which is why sale periods often look busy but make little money.

      Use the free calculator

      I built a free ROAS and breakeven ROAS calculator that does the maths for you, including VAT and payment fees. Put in your average order, costs and ad spend and it shows your breakeven ROAS, the target for your profit goal and whether your ads are making money.

      If the numbers are uncomfortable, that is useful too. It usually means the fix is in pricing, product choice or tracking rather than in the ads themselves.

      Questions and answers

      What is a good ROAS?

      One that is comfortably above your breakeven ROAS. A 3x ROAS is good for one business and loss-making for another.

      Should ROAS include VAT?

      Google and Meta usually report revenue including VAT, so compare like with like: use VAT-inclusive revenue and take VAT off when working out profit.

      What is POAS?

      Profit on ad spend: profit after product costs divided by ad spend. It shows directly whether ads make money.

      Sources

      1. About Target ROAS bidding, Google Ads Help
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