Break-even ROAS calculator

Break-even ROAS is the ROAS at which the margin on your orders exactly pays for the ads: below it ads lose money, above it they earn. It's measured against the ROAS Ads Manager reports, which counts every order, including the ones that come back.

Break-even ROAS: 2.55x
Margin per order, after returns: $19.60

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The formula

Margin on a kept order = order value × (1 − product cost − payment fees) − shipping
Margin per order, after returns = kept share × margin on a kept order − return rate × (shipping + return shipping), where kept share = 1 − return rate
Break-even ROAS = order value ÷ margin per order, after returns

Rates are shares between 0 and 1: 30% is 0.3. Returned products are assumed to go back into stock.

Worked example

Orders average $50. Product cost is 40% of that and payment fees 2%.

Shipping costs $3 each way, and 20% of orders come back.

A kept order leaves $26 ($50 − $20 − $1 − $3). After returns, the average order leaves $19.60, so the ads break even at a ROAS of 2.55x.

Questions

What does break-even ROAS mean?

It's the ROAS where ads neither make nor lose money: each unit of ad spend brings back exactly enough margin to pay for itself. Aim above it to leave room for profit and the costs this doesn't cover, such as salaries and software.

Why do returns raise break-even ROAS?

Ads Manager counts every order, including ones that are later returned and refunded. A returned order earns nothing and costs shipping both ways, so leaving returns out makes break-even look lower than it really is.

Should I enter order value with or without sales tax or VAT?

Use order value after the tax is taken out, because it isn't yours to keep. Counting it makes every ROAS look better than it is. Keep product cost, fees and ad spend on the same basis.

What does a dash mean?

A dash means the average order loses money before any ad spend, so no ROAS can break even. Lower costs, raise prices or cut returns first.

The full guide

Break-Even ROAS: The Formula, With Returns and a Worked ExampleBreak-even ROAS is 1 divided by your margin, but only if the margin is honest. The formula with shipping, payment fees and returns, worked through in dollars.