Quick answer
On an $80 order with $28 of product cost, $7 of shipping and $5 of other costs, gross profit is $40, a 50% margin, so break-even ROAS is 2.0x. At a 3.0x ROAS the ad cost is $26.67 per order and net profit is $13.33. Below 2.0x, every order loses money.
How the Target ROAS Break-Even works, step by step
Enter your selling price and every cost that comes out of each order: product cost, shipping and other costs such as packaging and payment fees. The calculator subtracts them all from the price to get gross profit per order, then divides by the price to get the margin. The margin is the only number that sets the break-even ROAS.
Break-even ROAS is one divided by the margin. At a 50% margin it is 2.0x; at a 25% margin it is 4.0x; at a 20% margin it is 5.0x. The relationship is not linear, so a small margin cut has a large effect: dropping from 50% to 40% margin pushes break-even ROAS from 2.0x to 2.5x. That is why discounting to win sales can quietly make the ad account unprofitable.
The current ROAS slider shows what your ads actually earn. Ad cost per order is the price divided by ROAS, so at 3.0x on an $80 order the ad cost is $26.67. Subtract that from the $40 gross profit and the net per order is $13.33. The calculator flags the result profitable only when current ROAS is at or above break-even.
ROAS reported by an ad platform is usually flattered. Platforms claim credit for sales that would have happened anyway, count returning customers as ad wins, and use attribution windows that stretch for weeks. Treat the platform number as an upper bound, and compare it with the blended revenue divided by total ad spend across the whole store.
Two levers move the break-even line: raise the margin or raise the order value. A higher price, a cheaper product cost or lower shipping all lift the margin and lower the ROAS you need. Raising average order value through bundles works differently: it spreads the same ad cost over more revenue, which lifts the ROAS you actually get.
The formula
Gross profit = selling price minus product cost minus shipping minus other costs. Margin = gross profit divided by selling price. Break-even ROAS = 1 divided by margin. Ad cost per order = selling price divided by current ROAS. Net profit per order = gross profit minus ad cost per order.
Worked example — try it on the calculator above
Worked example: $80 order, $40 gross profit, 3.0x ROAS
An $80 order carries $28 of product cost, $7 of shipping and $5 of other costs, leaving $40 of gross profit, a 50% margin. Break-even ROAS is 1 divided by 0.50, or 2.0x. At a current ROAS of 3.0x, ad cost per order is $80 divided by 3, or $26.67, and net profit per order is $40 minus $26.67, or $13.33. At a ROAS of 1.5x, ad cost would be $53.33 and each order would lose $13.33. A 10% discount would cut the price to $72 and the margin to 44.4%, pushing break-even ROAS to 2.25x. The discount looks small on the price tag and large on the ad account: the ROAS the business needs rises by an eighth.
Frequently Asked Questions
What is a good ROAS?
It depends entirely on your margin. At a 50% margin, 2.0x breaks even and 3.0x is profitable; at a 25% margin, 3.0x still loses money and you need 4.0x. There is no good ROAS without a margin beside it, which is why this calculator starts from your order economics.
What is the difference between ROAS and ROI on ads?
ROAS is revenue divided by ad spend; ROI on ads is profit divided by ad spend. A 3.0x ROAS sounds strong, but at a 50% margin it is only a 50% return on the ad spend after product costs. ROAS ignores costs, so it always flatters the ad account.
Why is my platform ROAS higher than my real ROAS?
Ad platforms claim credit for sales that would have happened anyway, count returning customers as ad wins, and use long attribution windows. Your real ROAS is total store revenue divided by total ad spend. If the platform says 4.0x and the store says 2.5x, the store is right.
How do I improve a ROAS below break-even?
Either lift the margin, by raising price, cutting product or shipping cost, or lower the ad cost per order, by improving targeting, creative or landing pages. Raising average order value through bundles also helps, because the same ad cost then buys more revenue per order.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.