Break-even ROAS: how to calculate it from your margin
A ROAS of 3 at a 25 percent margin is a loss. 100 in ads brings 300 in sales, but those sales leave only 75 in profit — 25 less than the ads cost. A good ROAS is not one number for every store. It starts at the threshold your margin sets.
Updated 2026-10-16
What ROAS is
ROAS (return on ad spend) is the sales from an ad divided by what the ad cost:
ROAS = sales from ads / ad spend100 spent on ads that brought 300 in sales is a ROAS of 3. Some ad platforms show it as a percentage instead: a ROAS of 3 is the same as 300%.
ROAS tells you how much you sold, not how much you earned. You pay for ads out of the profit on the goods, not out of the whole sale — and that is where the break-even point comes from.
Break-even ROAS — the formula
break-even ROAS = 1 / marginA 25% margin: 1 / 0.25 = 4. 100 in ads has to bring in 400 in sales: the profit on those sales is 400 × 25% = 100, exactly what the ads cost. Below 4 the ads lose money, above 4 they make money — a ROAS of 5 leaves 125 − 100 = 25 for every 100 spent on ads.
The calculator above works out your margin from a cost and a price, and below the results it shows the break-even ROAS at that margin. The buttons under the fields load the examples from the video: a 25%, 40% and 50% margin.
Table: margin and break-even ROAS
| Margin | Break-even ROAS | As a percentage |
|---|---|---|
| 10% | 10 | 1000% |
| 15% | 6.67 | 667% |
| 20% | 5 | 500% |
| 25% | 4 | 400% |
| 30% | 3.33 | 333% |
| 40% | 2.5 | 250% |
| 50% | 2 | 200% |
| 60% | 1.67 | 167% |
The lower the margin, the faster the threshold climbs: at a 10% margin an ad has to bring in ten times what it cost before it starts to make money.
What to count in the cost
Work out the margin for this from everything you pay per order apart from the ads: the goods, shipping (the part the customer does not pay), packaging, payment fees. If you use the cost of the goods alone, the margin comes out too high and the threshold too low — and an ad that pays off on paper quietly loses money.
An example at a net price of 100: goods 60, shipping 10, packaging 2, payment fee 3. The margin on the goods alone is 40%, so the threshold comes out at 2.5. After all the order costs, 25 is left — a 25% margin — and the real threshold is 4.
With tax or without — the same amounts on both sides
An ad platform reports sales from whatever amounts your store or marketplace sends it: with VAT or sales tax, or without, depending on the setup. Count the sales and the margin from the same amounts, both net or both gross. If the platform reports sales including 20% VAT and your margin is based on net prices, the threshold at a 25% margin is 1.2 / 0.25 = 4.8, not 4 — because part of the “sales” in the report is tax you pass on anyway.
There is no single good ROAS for a whole store
The same ROAS of 3 on a product with a 50% margin earns 150 − 100 = +50 for every 100 spent on ads, and on a product with a 20% margin it earns 60 − 100 = −40. A campaign that promotes the whole catalogue can show a decent average ROAS and still lose money on the low-margin products — the profit on some simply covers the loss on others.
So it pays to know the threshold for each group of products with a different margin, and to set campaigns (or a target ROAS in Google Ads) by that, not by one number for the store. And keep in mind that break-even ROAS is the point where you break even, not a goal: a campaign sitting exactly on it spends all the profit from the sales it brought in on the ads.
What this calculation leaves out
- Customers who would have bought anyway. An ad platform credits itself with sales by its own attribution model, including when the customer would have come back to the store regardless.
- Refunds. An order refunded a week later usually stays in the ad report as a sale.
- Repeat purchases. A customer who comes back without ads can be worth more than the first order — so a first sale below the threshold can be deliberate.
Break-even ROAS is therefore a threshold for a single order: a plain line below which an ad is certainly not making money on that sale.
Product and category margins from Merchgain
For the threshold you need the margin of the products you advertise, not the store average. Merchgain is a free profit report for WooCommerce: from the cost saved in the Cost of goods field it shows the profit and margin of every product and every category, from revenue after discounts. That is the margin on the goods alone, without tax and without shipping — take off shipping, packaging and fees as above before you divide 1 by the margin.
The margin and markup formulas are in the margin vs markup calculator, and how much more you need to sell after a price cut is in the discount margin calculator.
Nothing you type into the calculator above leaves your browser. The whole calculation is a few divisions and runs on your computer. The page visit itself is counted, without a cookie, as on every page of this site: see privacy.