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Compare reported ROAS with the return needed to cover each sale.
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Break-even ROAS calculator
Break-even ROAS = 1 ÷ contribution margin. At a 25% margin, you need a ROAS of 4; at 40%, you need 2.5. Use the free ROAS calculator below to include your costs and find a Google Ads target that leaves the profit you want to keep.
Berend Vrakking, founder. Last updated .
Your results
Profitable: a ROAS of 8.33 is above your break-even ROAS of 4.15.
- Net profit
- €1,208.68
- ROAS
- 8.33
- Break-even ROAS
- 4.15
- POAS
- 2.01
- ROI on ad spend
- 100.7%
- Target ROAS
- 632%
- Set this in Google Ads to keep 10% of revenue as profit after ads.
- Net revenue (excl. VAT)
- €8,264.46
- Product gross profit
- €3,140.50
- Total variable costs
- €731.82
- Contribution margin
- €2,408.68
Want profit on ad spend as your main number? Use the POAS calculator.
ROAS, break-even ROAS and target ROAS all use revenue incl. VAT. If your Google Ads conversion values exclude VAT, enter revenue excl. VAT and set VAT to 0%.
POAS is contribution margin ÷ ad spend; 1 is break-even. ROI on ad spend is net profit ÷ ad spend; 0% is break-even.
How it works
Every step behind the numbers, worked through for the start values.
Ten inputs: revenue incl. VAT, VAT rate, ad spend, product margin, return rate, reverse logistics, shipping collected, shipping cost, payment fee and the profit to keep. The start values describe an example shop with €10,000.00 revenue and €1,200.00 ad spend.
| Step | Calculation | Result |
|---|---|---|
| Net revenue (excl. VAT) | €10,000.00 ÷ 1.21 | €8,264.46 |
| Revenue after returns | €8,264.46 × (1 − 5%) | €7,851.24 |
| Product gross profit | €7,851.24 × 40% margin | €3,140.50 |
| Payment fees | €7,851.24 × 2.5% | €196.28 |
| Reverse logistics | €7,851.24 × 3% | €235.54 |
| Net shipping cost | €800.00 − €500.00 collected | €300.00 |
| Total variable costs | Payment fees + reverse logistics + net shipping | €731.82 |
| Contribution margin | €3,140.50 − €731.82 | €2,408.68 |
| Net profit | €2,408.68 − €1,200.00 ad spend | €1,208.68 |
| ROAS | €10,000.00 ÷ €1,200.00 | 8.33 |
| Break-even ROAS | €10,000.00 ÷ €2,408.68 | 4.15 |
| POAS | €2,408.68 ÷ €1,200.00 ad spend | 2.01 |
| ROI on ad spend | €1,208.68 ÷ €1,200.00 ad spend | 100.7% |
| Target ROAS | €10,000.00 ÷ (€2,408.68 − 10% of €8,264.46) | 632% |
Break-even here is the ROAS at which ad spend uses up the whole contribution margin. This shop needs a ROAS of 4.15 and gets 8.33, so it keeps €1,208.68 before fixed costs, an ROI on ad spend of 100.7%. To keep 10% of revenue as profit after ads, the target ROAS is 632%.
ROI on ad spend is net profit ÷ ad spend, so ROI = POAS − 1: a POAS of 2.01 is an ROI of 100.7% here. ROAS leaves costs out; ROI counts them.
See how contribution profit changes the return on your advertising: POAS meaning in marketing and the difference from ROAS
Formula
What is break-even ROAS? The lowest return at which ads pay for themselves.
Break-even ROAS is the return on ad spend at which the margin from ad-driven sales exactly covers the ad spend: profit is zero before fixed costs. Above it, ads make money; below it, every sale costs you.
Treat it as a floor, not a target. A target adds the profit you want to keep on top of it, as shown under Google Ads below.
Break-even ROAS = 1 ÷ contribution margin %
Contribution margin % = (revenue excl. VAT − cost of goods − variable costs per order) ÷ revenue excl. VAT. Variable costs are those tied to each order: shipping, payment fees, packaging, pick and pack, returns. Leave out fixed costs such as rent and salaries.
Contribution margin counts variable costs only. Net margin also subtracts fixed costs. Break-even ROAS uses contribution margin.
Example per order
| Item | Amount |
|---|---|
| Order value (excl. VAT) | €100.00 |
| Cost of goods | €45.00 |
| Shipping subsidy | €5.00 |
| Payment fees (3%) | €3.00 |
| Pick, pack and packaging | €2.00 |
| Contribution margin | €45.00 (45%) |
| Break-even ROAS | 1 ÷ 0.45 = 2.22 |
At a ROAS of 2.22, ad revenue just covers ad spend and variable costs. Above 2.22, each sale contributes profit before fixed costs.
The calculator above works the same way on your totals, and also counts returns, VAT and shipping you charge. With those set to zero it gives exactly 1 ÷ margin.
Which margin
Break-even ROAS formula: 1 ÷ margin, which margin?
Use contribution margin: the share of revenue left after cost of goods, shipping, payment fees, packaging and returns. Leaving an order cost out makes the ROAS you need look too low.
Gross margin subtracts cost of goods only. Whenever an order has other costs it is the higher of the two, so 1 ÷ gross margin gives a break-even ROAS that is too low.
| Margin used | Per order (excl. VAT) | Break-even ROAS |
|---|---|---|
| Gross margin | €100.00 − €45.00 cost of goods = €55.00 (55%) | 1 ÷ 0.55 = 1.82 |
| Contribution margin | €100.00 − €45.00 cost of goods − €5.00 shipping − €3.00 payment fees − €2.00 pick and pack = €45.00 (45%) | 1 ÷ 0.45 = 2.22 |
Run ads at a ROAS of 2 and each €100.00 order costs €50.00 in ads. Gross margin says you keep €5.00 (€55.00 − €50.00), so the ads look profitable. Contribution margin says you lose €5.00 (€45.00 − €50.00). They lose money: a ROAS of 2 is below the real break-even of 2.22.
Why it matters
One number that guards your margin and tells you when to scale.
Bidding logic
Target ROAS and manual bids with a clear margin behind them.
Confidence to scale
After increasing spend, check that the extra sales still cover the extra ad cost.
Budget allocation
Spot campaigns and products below the line, and move spend to those above it.
What moves it
Four things that shift your real break-even, and how to account for them.
Returns and refunds
Reduce revenue by the expected return rate and add reverse logistics to variable costs. Return rates differ by category and product, so avoid one account-wide average.
VAT
Calculate margin on revenue excl. VAT, and compare ROAS on the same basis as the conversion values in your ad account.
Payment mix
Fees differ by method, such as buy now, pay later or American Express. Weight them by each method’s share of orders for one blended rate.
Marketplaces
Referral and fulfilment fees, plus higher return rates, change the economics. Count them as variable costs.
Google Ads
Use break-even ROAS in Shopping and Performance Max, product by product.
One account-wide number hides the products that lose money. Margins differ per product, so break-even does too.
- Step 1
Add business data to your products
Bring margin, return rate, stock and price position into your product data, so each product can be judged on profit, not revenue alone.
- Step 2
Group products by performance
Split products by advertising clicks and return against your target. Product Segmentation does this with machine learning: your products are segmented and each segment is written to a Merchant Center custom label.
- Step 3
Build campaigns per group
Filter products by custom label. Use separate campaigns when groups need different budgets or targets; asset groups share their campaign’s budget and target.
- Step 4
Set targets above the floor
Choose the profit you want to keep and set target ROAS to 1 ÷ (margin − profit kept). Review contribution per group weekly, allowing for conversion lag.
Target ROAS when you keep 10% of revenue as profit
| Margin | Break-even ROAS | Target ROAS |
|---|---|---|
| High margin (45%) | 2.22 | 286% |
| Mid margin (30%) | 3.33 | 500% |
| Low margin (20%) | 5 | 1,000% |
Shopify and dropshipping
Break-even ROAS for Shopify and dropshipping stores.
Use the costs of your own orders, whichever platform you sell on. For dropshipping, include the supplier’s price and delivery charges. For own-brand products, include production or purchase cost as well as fulfilment. The ranges below are examples; calculate your contribution margin after shipping, payment fees and returns.
| Store type | Margin | Break-even ROAS |
|---|---|---|
| Dropshipping | 15–30% | 6.67 to 3.33 |
| Own-brand Shopify | 50–70% | 2 to 1.43 |
Illustrative margins, not benchmarks. Break-even ROAS is 1 ÷ margin at each end of the range.
ROAS calculator questions, answered.
How do I calculate ROAS?
ROAS = revenue ÷ ad spend. In this example, €10,000.00 of revenue on €1,200.00 of ad spend is a ROAS of 8.33. ROAS leaves costs out, so compare it with your break-even ROAS: this ROAS calculator shows both, with net profit and POAS.
How do you calculate break-even ROAS?
Divide 1 by your contribution margin as a fraction. With a 45% margin after cost of goods and variable order costs, break-even ROAS is 1 ÷ 0.45 = 2.22. On totals, it is revenue divided by contribution margin.
What is a good ROAS for Google Shopping?
There is no universal number. A good ROAS is one above your own break-even ROAS, with enough room for conversion lag and cost changes. A shop with a 20% margin needs a ROAS of 5 to break even; one with a 50% margin needs 2.
Should revenue include VAT?
Margins are calculated excl. VAT. Compare ROAS on the same basis as the conversion values your ad account records: if they include VAT, keep VAT in revenue; if not, leave it out.
What is the difference between break-even ROAS and target ROAS?
Break-even ROAS is the floor where profit is zero. Target ROAS is the goal you set in Google Ads: 1 ÷ (margin − the profit you want to keep), as a percentage. Keeping 10% of revenue at a 30% margin gives a target ROAS of 500%, against a break-even ROAS of 3.33. If you track profit instead of revenue, the equivalent break-even is a POAS of 1.0; see the POAS calculator.
Can one break-even ROAS cover all my products?
Only if margins and return rates are similar. Usually they aren’t, so a blended ROAS hides products that lose money. Product Metrics works on ROAS straight away and switches to POAS once you connect margins.
Is break-even ROAS 1 divided by gross margin?
Almost. Use 1 ÷ contribution margin: revenue minus cost of goods, shipping, payment fees and returns. Gross margin only subtracts cost of goods, so it puts break-even too low and makes loss-making ads look profitable.
What is a good break-even ROAS?
A lower one: it means you have more margin to spend on ads. Below 2 (a margin above 50%) gives a lot of room; above 5 (a margin below 20%) leaves little. The ROAS you actually run should sit above it. Read What is a good ROAS? for the full picture.
How do I calculate break-even ROAS for dropshipping?
Same formula, but include the supplier price, shipping and payment fees in your costs. At a 20% contribution margin, break-even ROAS is 5.
How do I turn break-even ROAS into a target ROAS for Google Ads?
Target ROAS = revenue ÷ (contribution margin − the profit you want to keep). The calculator does this for you; set the result as a percentage in Google Ads (632% = 6.32). See Set a target ROAS from your margin.
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See which products clear their break-even, and which don’t.
Product Metrics segments your products by advertising clicks and return against your target, then writes each segment to a Merchant Center label your campaigns use.
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