Break-Event ROAS Calculator
(To understand how this work you can read instruction below)
Break Even ROAS: The Formula, The Calculator, and Why You Are Losing Money
You are likely here because you want to know the exact number your Facebook or Google Ads need to hit to stop burning cash. You are looking for that specific multiplier that turns red numbers into black.
We have included a Break Even ROAS Calculator above to do the math for you instantly. But before you plug in your numbers, we need to have a serious conversation about which numbers you are using.
In my experience working with ecommerce entrepreneurs, I see the same dangerous pattern over and over again: businesses that think they are profitable because they hit a 4.0 ROAS, only to realize months later that their bank account is slowly draining.
Why? Because they didn't know their real numbers. Let’s fix that right now.
TL;DR:
For the example above with the 4.0 ROAS, if your Break-Even ROAS is greater than 4, you will be loosing money. Otherwise if it's lower than 4, everythin above your Break-Even ROAS,'' is real profit.
What is Break Even ROAS? (The Real Definition)
Technically, Break Even ROAS (Return On Ad Spend) is the specific ROAS metric where your revenue equals your total costs. At this exact point, you neither make money nor lose money. You are at zero.
- ROAS > Break Even Point: You are generating profit.
- ROAS < Break Even Point: You are paying for the privilege of selling products (losing money).
Most people treat this as just another KPI in their dashboard. I prefer to view it as your survival line. If you don't know this number down to the decimal, you aren't running a business; you are gambling.
The Biggest Mistake: "Industry Cost" vs. Real Cost
Here is where most store owners fail before they even launch their first ad.
Many entrepreneurs think that to set a price, they only need to consider how much the product costs from the supplier or the industry standard, and that’s it. They see a product on AliExpress for $10, sell it for $30, and assume they have a $20 margin to play with.
This is a trap. In reality, when they set a price based on that simple math, they realize in the medium run they are actually losing money on every single sale.
To have a successful business, you must have your numbers crystal clear. You need to know every single variable that makes up your price structure. If you leave variables out, your Break Even ROAS calculation will be wrong, and you will spend more on ads than you can afford.
The Hidden Variables: Fraud, Returns, and "Leakage"
When using our calculator above, you cannot just input your "Product Cost." You need to account for the "Silent Killers" of ecommerce margins.
If you ignore these, your break-even point is actually higher than you think:
1. Returns and Refunds
In many niches, a 10% to 20% return rate is standard. If you sell a product for $100, but 1 in 5 comes back, your real revenue per unit isn't $100. You need to factor the cost of the lost shipping, the damaged packaging, and the refund itself into your margin.
2. Fraud and Chargebacks
It is an ugly reality, but fraud happens. Chargeback fees from payment processors can be hefty. Even if it’s only 1% of your sales, that is 1% that eats directly into your profit margin.
3. Structural Losses
Damaged inventory, lost packages that the carrier won't reimburse, and samples sent to influencers. These are not "marketing expenses"; they are costs of goods sold (COGS).
The Takeaway: When you calculate your margin, deduct a percentage for "Losses & Returns" upfront. Better to be pessimistic with your math and surprised by extra profit, than optimistic and broke.
You should sum them up and put it on the Froud input.
How to Calculate Break Even ROAS (The Formula)
Now that you have identified your real costs, the math is straightforward.
Step 1: Calculate your Break Even Margin
(Remember: Total Costs includes Product + Shipping + Tax + Payment Fees + Estimated Returns/Fraud).
Step 2: The ROAS Formula
Practical Example
Let's look at a typical scenario:
- Selling Price: $100
- Product Cost (COGS): $30
- Shipping & Fulfillment: $10
- Payment Fees (Stripe/PayPal): $3
- Estimated Returns/Fraud Buffer: $7
Total Cost: $50 Profit: $50 Margin: 50% (or 0.50)
This means for every $1 you spend on ads, you need to make $2 back just to cover costs. Anything above 2.0 is profit. Anything above is a loss.
The Golden Rule: Is Your Ecommerce Healthy?
Calculating the number is one thing; understanding if your business model works is another.
You might find that your Break Even ROAS is 4.0. That means you need an incredibly high-performing ad account just to stay afloat. That is risky.
In my experience analyzing successful stores, a healthy ecommerce business must have their net margin no lower than 25% after all expenses (including ad spend).
If your break-even requirement is so high that it leaves you with a razor-thin margin, you don't have an ad problem; you have a pricing problem. You need to either negotiate better terms with suppliers, increase your Average Order Value (AOV), or raise your prices to ensure that 25% safety net.
Use Our Interactive Calculator
Stop guessing. Use the tool above to input your selling price, COGS, and those "hidden variables" we discussed (shipping, fees, and returns).
Conclusion
Knowing your Break Even ROAS isn't just about managing your Google Ads or Facebook Ads bids. It’s about understanding the fundamental health of your project.
Don't be the entrepreneur who looks at the "Industry Cost" and calls it a day. Dig deep, account for the fraud, the returns, and the operational drag. Get your numbers crystal clear. Once you do that, you can scale your budget with confidence, knowing exactly when to push the accelerator and when to pull back.
FAQ: Frequently Asked Questions
What is a good Break Even ROAS?
There is no universal number, as it depends on your margins. However, a lower Break Even ROAS is better because it's easier to achieve. If your Break Even ROAS is 1.2, you will be profitable much faster than if it is 3.5.
Does Break Even ROAS include agency fees?
Ideally, yes. If you pay an agency or a freelancer to manage your ads, that is a cost of acquisition. You should factor their monthly fee into your operational costs to get a truly "crystal clear" picture of your profitability.
Why is my ROAS high but I'm losing money?
You are likely ignoring variable costs. You might be calculating based on gross margin (Price - Product Cost) but forgetting shipping, taxes, transaction fees (2-3%), and return rates. Recalculate using the variables listed in this article.