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Calculate Break-Even ROAS
Common Questions
Frequently Asked Questions
What is break-even ROAS in ecommerce?
Break-even ROAS is the minimum Return on Ad Spend needed to cover all costs and achieve zero profit. It's calculated by dividing your price by your contribution margin (gross profit minus fees and refunds). For example, if you need $3 in revenue for every $1 spent on ads to break even, your break-even ROAS is 3.0.
What is a good ROAS for ecommerce ads?
A 'good' ROAS depends on your margins. Generally, 4:1 ROAS is considered solid, but high-margin products can be profitable at 2:1, while low-margin products may need 6:1+. Focus on beating your break-even ROAS by at least 50% to ensure healthy profits.
Why is my actual ROAS lower than my target ROAS?
Common reasons include: inaccurate attribution (iOS 14+), high CAC from competitive auctions, poor ad creative, misaligned targeting, or seasonality. Also check if you're accounting for all costs. Many founders forget platform fees and refunds when calculating target ROAS.
How do I calculate ROAS for different ad platforms?
Use the same formula: ROAS = Revenue / Ad Spend. However, each platform (Google Ads, Meta Ads, TikTok) may report differently. For accurate calculation, track actual revenue in your store analytics and divide by the ad spend from each platform. Don't rely solely on platform-reported ROAS.
Should my break-even ROAS include shipping costs?
Yes, if shipping isn't covered by customer fees. Include shipping in COGS when calculating gross margin. If customers pay for shipping, don't count it. The key is whether shipping reduces your contribution margin per sale.
How do platform fees affect break-even ROAS?
Platform fees (Shopify ~2-3%) and payment processing fees (~2.9%) reduce your contribution margin by 5-6% total, which directly increases your break-even ROAS. A product with 40% gross margin might need 2.5 ROAS before fees, but 3.0+ ROAS after fees to break even.