Anthony McGrathHow to calculate break-even ROAS
Every order has a profit before ads: what is left after VAT, product cost, shipping, payment fees and refunds. Your ads can spend up to that much to win the order and still break even.
Profit before ads = order value − VAT − refunds − payment fees − product − shipping − other
Break-even ROAS = order value ÷ profit before ads
Max cost per order (break-even CPA) = profit before ads
Target ROAS = 1 ÷ (profit before ads ÷ order value − profit % you want)
An example
A £50 order (VAT included) is £41.67 without VAT. Take off £15 product, £4 shipping, £1.25 payment fees and £1.25 refunds, and £20.17 is left before ads. Break-even ROAS is £50 ÷ £20.17 = 2.48. Below a ROAS of 2.48, each order loses money.
Break-even ROAS by margin
| Margin before ads | Break-even ROAS | In Google Ads (%) | Target ROAS for 10% profit |
|---|---|---|---|
| 20% | 5.00 | 500% | 10.00 |
| 25% | 4.00 | 400% | 6.67 |
| 30% | 3.33 | 333% | 5.00 |
| 40% | 2.50 | 250% | 3.33 |
| 50% | 2.00 | 200% | 2.50 |
| 60% | 1.67 | 167% | 2.00 |
| 70% | 1.43 | 143% | 1.67 |
ROAS and POAS
ROAS counts revenue, not profit, so two campaigns with the same ROAS can make very different money if they sell products with different margins. Knowing your break-even ROAS per product range is the first step to bidding on profit.
Key terms
- ROAS
- Return on ad spend: revenue from ads ÷ ad spend.
- Break-even ROAS
- The ROAS at which ad spend uses up all the profit on an order: order value ÷ profit before ads.
- Target ROAS (tROAS)
- The ROAS you set as a goal, above break-even, so the ads leave the profit you want.
- Max CPA
- The most you can pay in ads for one order and break even. It equals your profit per order before ads.
- POAS
- Profit on ad spend: profit from ads ÷ ad spend. Above 1 means the ads made money.
Common questions
How do I calculate break-even ROAS?
Break-even ROAS = average order value ÷ profit per order before ads. Profit before ads is the order value minus VAT, refunds, payment fees, product, shipping and other costs. A £50 order with £20.17 left before ads has a break-even ROAS of 50 ÷ 20.17 = 2.48.
What is ROAS?
ROAS (return on ad spend) is the revenue your ads bring in divided by what you spent on them. £5,000 of sales from £1,000 of ads is a ROAS of 5, often written 5x or 500%.
What is break-even ROAS?
Break-even ROAS is the ROAS where an order pays back its ad cost and nothing more. Below it you lose money on each order, above it you make a profit.
Is there a quick break-even ROAS formula from margin?
Yes. Break-even ROAS = 1 ÷ margin before ads, where margin is measured against the order value your ad platform reports. A 25% margin needs a ROAS of 4, a 40% margin needs 2.5 and a 50% margin needs 2.
How do I set a target ROAS for Google Ads?
Decide the profit you want after ads as a share of order value, then target ROAS = 1 ÷ (margin before ads − profit you want). With a 40% margin and a 10% profit goal, target ROAS is 1 ÷ 0.30 = 3.33, or 333% in Google Ads.
Why does VAT matter for ROAS?
Google Ads and Meta usually report revenue including VAT, but VAT is not your money. If you are VAT registered your break-even ROAS is higher than it looks, which this calculator takes into account.
What is a good ROAS for ecommerce?
There is no single number. A good ROAS is one comfortably above your own break-even ROAS. A brand with a 60% margin can grow at a ROAS of 2.5, while a brand with a 25% margin may need 5 or more just to break even.
What is the difference between ROAS and POAS?
ROAS measures revenue per £1 of ads. POAS (profit on ad spend) measures profit per £1 of ads, so it accounts for different margins across products. A POAS above 1 means the ads made money.
Can I run ads below break-even ROAS?
Sometimes, if new customers buy again. Then you can judge first orders against lifetime value rather than one order. Do it on purpose and with a limit, not by accident.