---
title: "Dropshipping break-even ROAS: how to calculate it (and when to stop an ad)"
description: "Work out break-even ROAS and CPA for a dropshipping product, with a worked example, the formula and a rule for when to stop an ad."
canonical: "https://www.productmetrics.io/blog/dropshipping-break-even-roas"
pageType: article
language: en
publisher: "Product Metrics"
author: "Berend Vrakking"
datePublished: 2026-10-15
dateModified: 2026-10-15
image: "https://www.productmetrics.io/og/blog/dropshipping-break-even-roas.png"
---

> Content index: https://www.productmetrics.io/llms.txt

# Dropshipping break-even ROAS: how to calculate it (and when to stop an ad)

## Key takeaways

- Break-even ROAS = revenue per order ÷ profit per order before ads, after fees, refunds and chargebacks. The illustrative €39.99 product needs a ROAS of 2.19 and a CPA no higher than €18.26.
- Keeping 15% of revenue after ads lowers the example’s target CPA to €12.26 and requires a ROAS of 3.26, equivalent to a Google Ads target ROAS of 326%. Fixed costs and tax are excluded.
- Test clicks = 3 ÷ conversion rate as a fraction: 150 clicks at 2%. This is a rule of thumb assuming independent clicks, a stable rate and completed conversion lag.

**Break-even ROAS = revenue per order ÷ profit per order before ads.** If you sell a €39.99 product that leaves €18.26 after supplier cost, shipping, payment fees, refunds and chargebacks, your [break-even ROAS](https://www.productmetrics.io/glossary/break-even-roas "Break-even ROAS is the revenue-to-ad-spend ratio at which contribution profit exactly covers advertising costs.") is **2.19** and your break-even CPA is **€18.26**. Any ad that costs more than €18.26 per sale loses money, however good the dashboard looks.

You can run the numbers with the [free dropshipping break-even calculator](https://www.productmetrics.io/calculators/dropshipping-break-even-calculator). The rest of this page explains what it does and how to use the result. All numbers below are **illustrative data**, not merchant results or channel benchmarks.

## 1. Why “ROAS 3” can still lose money

[Return on ad spend (ROAS)](https://www.productmetrics.io/glossary/roas "Return on ad spend (ROAS) is the revenue your ads generate for every euro you spend on them.") is revenue divided by ad spend. It says nothing about what the product cost you. A ROAS of 3 is profitable on a 70% [contribution margin](https://www.productmetrics.io/glossary/contribution-margin "Contribution margin is the revenue from a sale minus its variable costs, such as product cost, shipping, payment fees and returns.") and a loss on a 25% margin. Thin margins leave little room between “looks fine” and “loses money”.

| Contribution margin before ads | Break-even ROAS | Profit per €100 revenue at ROAS 3 |
| --- | --- | --- |
| 25% | 4.00 | −€8.33 |
| 50% | 2.00 | €16.67 |
| 70% | 1.43 | €36.67 |

*Illustrative margins. Profit = revenue × contribution margin − revenue ÷ ROAS.*

The [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator) works this out from store totals. In profit terms, [POAS](https://www.productmetrics.io/glossary/poas "Profit on ad spend (POAS) is contribution profit before advertising divided by ad spend.") = ROAS × contribution margin, so break-even POAS is 1.0. See [POAS vs ROAS](https://www.productmetrics.io/blog/poas-vs-roas).

## 2. The formula, step by step

1. **Revenue per order** = selling price + any shipping the customer pays.
2. **Profit before leakage** = revenue − supplier cost − shipping cost − payment fees.
3. **Break-even CPA** = profit before leakage, minus expected revenue lost on refunds and chargebacks, including dispute fees.
4. **Break-even ROAS** = revenue ÷ break-even CPA.

CPA (cost per acquisition) is what you pay in ads for one sale. Break-even ROAS and break-even CPA are the same limit, seen from two sides.

> **Sidenote:** Use amounts excluding VAT or sales tax. Compare against ad revenue on the same basis. The calculator treats a refund as a full loss of revenue and assumes supplier, delivery and payment costs are already spent. Count refunded and charged-back orders once, not twice.

## 3. Worked example

A €39.99 product, €14.00 from the supplier, €4.00 shipping, 2.9% + €0.30 payment fee, 5% refunds, 0.5% chargebacks at €15 each. These are illustrative inputs; edit payment fees to match your gateway.

| Line | Amount |
| --- | --- |
| Selling price | €39.99 |
| Supplier cost | −€14.00 |
| Shipping cost | −€4.00 |
| Payment fee | −€1.46 |
| **Profit before leakage** | **€20.53** |
| Refunds (5% of orders lose the revenue) | −€2.00 |
| Chargebacks (0.5% × €54.99) | −€0.27 |
| **Break-even CPA** | **€18.26** |
| **Break-even ROAS** | **2.19** |

The shortcut, price ÷ (price − supplier cost), returns **1.54**. Run ads at ROAS 1.8 on that basis and you lose about **€4 on every order**: €39.99 ÷ 1.8 = €22.22 per sale, against a limit of €18.26. Calculations use unrounded amounts; the table shows rounded values.

**Figure: The shortcut understates the ROAS this product needs.** An ad at ROAS 1.8 clears the supplier-only shortcut of 1.54 but loses €3.96 per order against the full break-even of 2.19.

| Calculation or observed ad result | ROAS |
| --- | --- |
| Supplier-only shortcut | 1.54 |
| Ad running at 1.8 | 1.80 |
| Full break-even | 2.19 |

_Source: Illustrative data: €39.99 price, €14 supplier cost, €4 shipping, 2.9% + €0.30 payment fee, 5% refunds, 0.5% chargebacks with a €15 fee. Calculated from unrounded costs._

## 4. Break-even ROAS vs target ROAS

Break-even is the floor: you make nothing after ads and variable costs. To keep a margin, subtract it from the CPA. For a 15% margin on this product: €18.26 − (0.15 × €39.99) = **€12.26 target CPA**, so the required ROAS is **3.26**.

| Goal | Maximum CPA | Required ROAS | Google Ads [target ROAS](https://www.productmetrics.io/glossary/target-roas "Target ROAS is the average conversion value per unit of advertising cost that you ask Google Ads to aim for.") notation |
| --- | --- | --- | --- |
| Break even | €18.26 | 2.19 | 219% |
| Keep 10% of revenue | €14.26 | 2.80 | 280% |
| Keep 15% of revenue | €12.26 | 3.26 | 326% |

*Calculated from the same illustrative product. Fixed monthly costs and tax are excluded, so these are not final business net margins.*

Use break-even to decide whether a product can be advertised at all. Use a target that leaves the profit you need when configuring campaigns: [how to set a target ROAS from your margin](https://www.productmetrics.io/blog/target-roas-from-margin). Check the floor with the [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator).

## 5. Max CPC: why lower conversion rates need cheaper clicks

The most you can pay for a **click** is break-even CPA × your conversion rate as a fraction.

| Traffic example | Conversion rate | Max CPC to break even | Clicks per sale, on average |
| --- | --- | --- | --- |
| Google example | 2.0% | €0.37 | 50 |
| Meta example | 0.8% | €0.15 | 125 |
| Same product, stronger conversion | 3.0% | €0.55 | 33.3 |

*Example rates only: use your own analytics. The labels are not a claim about how Google or Meta traffic usually converts.*

**Traffic that converts worse has to be cheaper.** If a channel sells you clicks at €0.50 and your store converts them at 0.8%, expected ad cost per sale is €62.50, far above the €18.26 allowance.

## 6. When to stop an ad: a rule of thumb

Judge an ad by clicks and economics rather than elapsed days. Our rule of thumb is:

> **Give an ad 3 ÷ your conversion rate in clicks, rounded up. If it has not sold by then, pause and investigate.**

If your product really converts at 2%, 150 clicks is 3 ÷ 0.02. The chance of 150 clicks with no sale at a true 2% rate is **4.8%** (0.98 to the power of 150).

| Conversion rate | Clicks to test | Chance of no sale if the rate is real |
| --- | --- | --- |
| 0.8% | 375 | 4.9% |
| 1.0% | 300 | 4.9% |
| 1.5% | 200 | 4.9% |
| 2.0% | 150 | 4.8% |
| 3.0% | 100 | 4.8% |

*Calculated as (1 − conversion rate) raised to the number of clicks, the zero-success case of the [binomial distribution documented by NIST](https://www.itl.nist.gov/div898/handbook/eda/section3/eda366i.htm). The model assumes independent clicks with a stable conversion probability. The 3 ÷ rate stopping rule is our own rule of thumb, not a NIST recommendation.*

At the **unrounded break-even CPC**, this test costs about **3 × your break-even CPA**. For the example product that is €54.77, or about €55. At a different actual CPC, test spend is test clicks × actual CPC; it can be higher or lower.

Three limits. A sale during the test does not prove the ad is profitable. No recorded sale can mean broken tracking, so check your orders and recording first. And this is a **rule of thumb, not a guarantee**: it assumes your conversion-rate guess is reasonable and conversion lag has finished. Repeatedly resetting the test or changing the traffic mix changes what the probability means.

## 7. Refunds, chargebacks and cash on delivery

Put your actual refund and dispute rates into the calculator. Both reduce the margin available for ads when supplier costs are already spent. The [ecommerce return-rate guide](https://www.productmetrics.io/blog/ecommerce-return-rate) explains how returns change the economics.

| Cost | Simplification here | What to check in your own orders |
| --- | --- | --- |
| Refund | Full revenue lost, original costs retained | Partial refunds, recovered supplier costs, extra return shipping |
| Chargeback | Revenue plus a dispute fee lost | Gateway fee and whether the order was already refunded |
| Cash on delivery / RTO | Failed deliveries treated as lost revenue | Return delivery cost, recovered goods and denominator of your rate |

For cash on delivery, you can add the share of placed orders returned undelivered to the refund rate as a rough proxy, provided the categories do not overlap. Include additional return freight in average shipping cost. Do not mix a rate per placed order with a conversion rate counting only paid, delivered orders.

## 8. When the maths fails

If break-even ROAS is higher than you can realistically reach, try these four changes. Recalculate after each one.

| Lever | What changes in the model | What to verify |
| --- | --- | --- |
| Raise the price | More revenue per order | Conversion rate after the price change |
| Lower shipping or supplier cost | More contribution before ads | Delivery quality and hidden fees |
| Bundle | Higher order value, potentially shared shipping | The full bundle’s costs and conversion rate |
| Drop the product | Avoid an impossible advertising margin | Whether another product can meet your target |

Do not try to out-optimise an impossible margin. For products that pass, compare each with its own floor: [one ROAS target for all products hides losses](https://www.productmetrics.io/blog/break-even-roas-per-product). The calculator ignores fixed costs such as plans and apps; allocate those per monthly order if you want a fuller break-even.

## 9. Calculate your own product’s limits

Open the [dropshipping break-even calculator](https://www.productmetrics.io/calculators/dropshipping-break-even-calculator), replace the example costs and conversion rates, then copy the result link to share your assumptions. No email or sign-up is required.

If you sell many products, [Product Segmentation](https://www.productmetrics.io/product-segmentation) groups products by advertising clicks and return against your target, then writes each segment to a Merchant Center label your configured Shopping campaigns use. Connect margins to judge performance by POAS. [Check pricing](https://www.productmetrics.io/pricing) for the next step.

For more context, read [what is a good ROAS?](https://www.productmetrics.io/blog/what-is-a-good-roas), [how to calculate ROAS](https://www.productmetrics.io/blog/how-to-calculate-roas) and [POAS vs ROAS](https://www.productmetrics.io/blog/poas-vs-roas).

## Frequently asked questions

### What is a good ROAS for dropshipping?

A good dropshipping ROAS exceeds your own break-even ROAS and leaves the profit you need. The illustrative product breaks even at 2.19 and needs 3.26 to keep 15% of revenue after ads. Fixed costs and tax are excluded, so the required return for your whole business may be higher.

### How do I calculate break-even CPA?

Calculate break-even CPA by subtracting supplier costs, shipping, payment fees, expected refunds and chargebacks from revenue per order. The remainder is the advertising allowance per sale. The illustrative €39.99 order leaves €18.26 before ads. Allocate fixed monthly costs per order too if you want them included in the threshold.

### Does free shipping change break-even ROAS?

Free shipping changes break-even ROAS when it changes the revenue collected or the delivery cost you absorb. Enter zero shipping revenue when the customer pays nothing separately, while keeping supplier shipping as a cost. Recalculate if you increase the item price to cover delivery, using a consistent tax basis.

### How long should I test an ad?

Test an ad by clicks and product economics rather than days alone. Our rule of thumb is 3 divided by the assumed conversion rate as a fraction, rounded up: 150 clicks at 2%. Allow conversion lag to finish and check tracking. No sale is a reason to investigate, not proof of failure.

### Is break-even ROAS the same on Google and Meta?

Break-even ROAS is the same on Google and Meta for the same product economics and revenue basis. Maximum CPC differs with conversion rate: the same advertising allowance can support dearer clicks when more visitors buy. Use your own channel rates and completed conversion windows rather than treating our example rates as benchmarks.

### What if I have hundreds of products?

Calculate a separate break-even ROAS for each product when costs or margins differ. Product Metrics segments products by advertising clicks and return against your target, then writes each segment to a Merchant Center label used by configured Shopping campaigns. Connect margins to judge products by POAS as well as ROAS.

## Keep reading.

- [Dropshipping for beginners: an honest guide](https://www.productmetrics.io/blog/dropshipping-for-beginners)
- [Break-even ROAS per product: why one target hides losses](https://www.productmetrics.io/blog/break-even-roas-per-product)
- [How to calculate ROAS: formula and examples](https://www.productmetrics.io/blog/how-to-calculate-roas)

---

Written by Berend Vrakking, founder of Product Metrics. Last updated 2026-10-15.

HTML version: https://www.productmetrics.io/blog/dropshipping-break-even-roas