Breakeven ROAS Calculator
Work out the return on ad spend your shop actually needs before the advertising starts making money, and see where your current spend sits against it.
Everything is worked out in your browser, so none of these numbers are sent anywhere or saved.
Your numbers
Fill in what you know. The figures update as you type.
What one order is worth
Where you are now (optional)
If your margin is not quite what you think
Most people are working from a remembered margin rather than a measured one, so it is worth seeing what five points either way does to the target.
What breakeven ROAS actually means
Breakeven ROAS is the point at which your advertising has paid for itself and done nothing more, so every pound of revenue above it is profit and everything below it is a loss you are quietly funding out of the rest of the business. It is set entirely by your margin, which is why two shops spending the same money on the same platform can be working towards completely different targets, and why a 4x return can be comfortable for one of them and slowly damaging for the other.
This matters most when you are trying to scale, because the moment you push budget the return usually softens, and without a breakeven figure in front of you there is no way to tell whether the softer return is still profitable growth or the point where you started paying for revenue.
How it is worked out
Contribution per order = average order value − cost of goods − shipping and fulfilment − payment fees
Contribution margin = contribution per order ÷ average order value
Breakeven ROAS = 1 ÷ contribution margin
Breakeven cost per order = contribution per order
A shop with a £60 average order value that pays £21 for the goods, £4.50 to ship them and roughly £1.74 in card fees keeps about £32.76 from the order, which is a contribution margin of 54.6% and a breakeven ROAS of 1.83. The same shop with a 45% cost of goods instead of 35% keeps £26.76, and the target moves to 2.24, so ten points of margin has moved the number that governs every bidding decision in the account.
The return rate in the calculator applies a haircut to the contribution rather than modelling returns in detail, on the assumption that a returned order gives you the stock back but not the money you spent getting it out of the door. That is slightly conservative, and if you resell returns at full price your real position will be a little better than the figure shown.
Where these numbers usually go wrong
The margin is remembered rather than measured
Gross margin gets quoted from the last time anyone looked at it, and in the meantime supplier prices have moved, the product mix has shifted towards the cheaper lines and the discount codes have been running longer than intended. If the margin you typed in is a few points out, the sensitivity strip above shows you what that does to the target.
Shipping and fees are left out
They come out of the same order that pays for the advertising, so leaving them out is the most common reason a breakeven figure comes back looking far more comfortable than it is. On a low average order value they can be worth several points of margin on their own, and free delivery thresholds tend to push the average order up while pushing the margin down.
Discounting is not in the average order value
If a meaningful share of orders come through with a code attached, the average order value you should be using is the one after those discounts rather than the list price, because the discount is a real cost that lands on exactly the orders your ads are winning.
The platform's revenue figure is taken at face value
Ad platforms report the revenue they believe they caused, which is generally higher than the revenue your accounts will show for the same period, so a ROAS calculated from platform revenue is measuring a slightly different thing from a breakeven calculated on your own costs. It is still worth comparing the two, as long as you know the comparison is generous to the ads.
Common questions
What is a good ROAS?
There is no benchmark that works across businesses, because the answer depends entirely on your margin. A 4x return is comfortably profitable for a business keeping 60% after costs and loss making for one keeping 20%, so the only figure worth measuring yourself against is your own breakeven number and how far above it you are trading.
Is breakeven ROAS the same as breakeven CPA?
They are the same fact expressed two ways. Breakeven cost per acquisition is the money you can pay to win one order, which is your contribution per order, and breakeven ROAS is that same limit written as a ratio of revenue to spend. Use whichever matches the bidding strategy you are actually running.
Should I include my own salary or overheads?
Not in this calculation. Breakeven ROAS answers whether an extra order is worth winning, and rent, salaries and software carry on whether or not you win it, so folding them in gives you a number that tells you about the business rather than about the advertising. Look at those against total contribution once you know how many orders the ads are bringing in.
Does this account for repeat customers?
No, this is a first order calculation on a single purchase. If you have a real repeat purchase rate you can afford to trade below breakeven on the first order and recover the difference later, although that is a decision worth making from a measured repeat rate and a known payback period rather than from an assumption that customers will come back.
My breakeven ROAS looks very high. What now?
A high breakeven figure means the margin is thin, and no amount of account optimisation changes the arithmetic underneath it. The routes out are raising the average order value through bundles or thresholds, cutting the cost of getting the order out of the door, or moving the mix towards the products that actually carry margin, and all three of those will do more for the account than another round of bid adjustments.
Want someone to check the account against these numbers?
If your ads are running below the figure this calculator gives you, we can look at where the spend is going and what it would take to get above it.
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