What is break-even ROAS and how to calculate it

This guide shows you how to work out the return on ad spend you need before your ads stop losing money on each order, and how to turn that number into a target you can actually use.

BeginnerAbout 20 minutesReviewed November 2026

ROAS, or return on ad spend, is revenue divided by ad spend. Google Ads reports it as conversion value divided by cost, and its own example of a 500% target ROAS is $5 in sales for every $1 spent on ads.

Break-even ROAS is the ROAS at which the margin left on your orders exactly covers what you spent on ads. Below it, each ad-driven order loses money after variable costs. Above it, each order contributes something toward your fixed costs and profit.

The number comes from your margin, not from the ad platform. Two stores with the same ROAS can have very different results if one keeps 60% of each sale and the other keeps 25%.

Find your average order value

Take revenue for a recent period and divide it by the number of orders. Use revenue after discounts, since that is what you actually collected. Use the same definition of revenue that your ad tracking sends as conversion value. If your tracking includes shipping charges or tax and your average order value does not, the two numbers will never line up.

List your variable costs per order

Variable costs are the ones that rise with each sale: product cost, shipping and fulfillment, packaging, payment processing, and per-order app or marketplace fees. Fixed costs such as rent, salaries, and software subscriptions are left out of this calculation. If returns are a real part of your business, add an allowance for the revenue and costs you lose on them.

TipUse actual numbers from your books or store reports, not the margin you priced for when you launched the product.

Calculate margin per order before ad spend

Subtract the variable costs from average order value. Example: an $80 average order, product cost of 35% ($28), shipping and fulfillment of $8, and payment fees of 3% ($2.40). That leaves $41.60 per order before ads. As a share of revenue, that is a 52% contribution margin ratio.

Divide to get break-even ROAS

Break-even ROAS is average order value divided by margin per order. In the example, $80 divided by $41.60 is about 1.92. You get the same answer from 1 divided by the margin ratio: 1 divided by 0.52 is about 1.92. At a 1.92 ROAS, ad spend uses up the whole margin and the order breaks even.

TipThe margin per order is also your break-even cost per purchase. In the example, spending more than $41.60 in ads to win an order loses money on that order.

Match the format your ad platform uses

Some reports show ROAS as a ratio, such as 1.92. Google Ads target ROAS is entered as a percentage, so you multiply the ratio by 100: a break-even of 1.92 is a 192% target ROAS. Check which format a report uses before comparing it with your break-even, or the gap will look far bigger or smaller than it is.

Set a target ROAS that includes profit

Breaking even is a floor, not a goal. Decide what profit you want to keep per order after ads, then work backward. If you want 15% of the $80 order ($12) left after ads, you can spend $29.60 in ads per order. $80 divided by $29.60 is a target ROAS of about 2.70, or 270% in Google Ads terms.

Compare it with what the platform reports

Platform ROAS is based on the conversions that platform attributes to your ads, using its own attribution settings. Some of those sales would have happened anyway, and two platforms can claim the same order. Check the platform figure against your store’s revenue and total ad spend over the same period before deciding whether a campaign is really above break-even.

Recalculate when your costs change

Break-even ROAS moves whenever your margin moves. A price change, a new supplier, higher shipping rates, a big discount, or a shift toward lower-margin products all change it. Recalculate at least each quarter, and run a separate figure for promotions, since a 20% discount can raise break-even ROAS sharply.

Before you move on

Average order value uses the same revenue definition as your conversion tracking
Every per-order variable cost is included, fixed costs are not
You know your break-even ROAS as both a ratio and a percentage
You have a target ROAS that leaves room for profit
You know your break-even cost per purchase

Official resources

Ad platforms update their tools often. This guide was last reviewed against the official documentation above in November 2026. If your screen looks different, the official help pages have the latest steps.

At a glance

Level: Beginner
Time: About 20 minutes
What you need: Your average order value for the period you want to measure
Product cost per order, or cost of goods as a percentage of revenue
Shipping, fulfillment, and packaging cost per order
Payment processing and platform fees
A rough return and refund rate, if you have one

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Where DIY setups go wrong

The most common problems with self-built ad setups, and what they cost.

Using gross margin only

Product cost is only part of the picture. Leaving out shipping, fulfillment, and payment fees makes break-even ROAS look lower than it is, so campaigns that lose money look fine.

Treating break-even as the target

A campaign running at break-even covers its own ad spend and nothing else. Rent, salaries, and profit still have to come from somewhere.

Ignoring discounts and promotions

Discounts come straight out of margin. A sale that cuts the price by 20% can push break-even ROAS well above your normal figure, while platform ROAS may look healthy.

Trusting platform ROAS on its own

Each platform counts the conversions it can attribute to itself. Judging only by in-platform ROAS can overstate what ads add to the business.

Mixing very different products

A store-wide average hides products with thin margins. If margins vary a lot, calculate break-even ROAS for your main product groups separately.

What this guide doesn't cover

Break-even ROAS tells you the minimum a single order has to return. It does not tell you how much ads add to total sales, whether a new customer will buy again, or how to split budget across channels that all claim the same orders.

ADM sets targets from each client’s contribution margin and judges results on blended numbers such as MER and new customer acquisition cost, not platform ROAS alone.

MER, or total revenue divided by total ad spend
New customer acquisition cost and payback period
Repeat purchase value and how it changes what you can pay for a first order
Incrementality and holdout testing
Channel budget allocation based on margin, not attributed ROAS

Common questions

What is a good ROAS?

There is no universal number. A good ROAS is one comfortably above your own break-even ROAS, which depends entirely on your margins.

What is the break-even ROAS formula?

Break-even ROAS equals 1 divided by your contribution margin ratio, or average order value divided by margin per order before ad spend. A 52% margin gives a break-even ROAS of about 1.92.

Is 200% ROAS the same as a 2.0 ROAS?

Yes. A percentage is the ratio multiplied by 100. Google Ads uses percentages for target ROAS, and many other reports use ratios.

Should break-even ROAS include fixed costs?

No. It uses per-order variable costs so you can judge each order. Fixed costs are covered by the profit you earn above break-even.

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