What ROAS do I need to break even?
Last updated
Break-even ROAS is set entirely by it, so there is no line to draw until it is here.
What is left of an order after the cost of the goods, payment fees, shipping you absorb and returns. If you have only taken out the cost of the goods, this number is too high and the line is too low.
Enter your gross margin as a percentage between 1 and 99. Break-even ROAS is set entirely by that margin, so there is no line to draw until it is supplied.
- Gross margin, as a percentage from 1 to 99Needed
- Your current ROAS, which places you against the lineOptional
- 10%
- 10.00x
- 15%
- 6.67x
- 20%
- 5.00x
- 25%
- 4.00x
- 30%
- 3.33x
- 35%
- 2.86x
- 40%
- 2.50x
- 45%
- 2.22x
- 50%
- 2.00x
- 55%
- 1.82x
- 60%
- 1.67x
- 70%
- 1.43x
- 80%
- 1.25x
Payment fees come out of this margin before advertising does. Work out your margin after Shopify fees, or work out your ROAS first if you do not have it to hand.
Nothing you type is sent anywhere. There is no account, no install and no store connection — the arithmetic runs where you are reading it.
Margin, the line and the headroom above it
Break-even ROAS is the return on ad spend at which a campaign pays for the goods it sold and nothing more, so a store running a 40 percent gross margin breaks even at 2.50x.
No benchmark and no published figure is used here — break-even ROAS is derived entirely from the margin you supply, which is why no source is cited for it. Getting that margin right is the hard part: the fees calculator works out what an order actually contributes after payment processing.
One line, and then the same line read backwards. The arithmetic is trivial; the margin you feed it is where every mistake on this page lives.
- Gross margin
- What is left of an order before advertising, as a percentage of the order. Cost of goods out, payment fees out, shipping you absorb out, returns allowed for. Every other figure on this page is derived from it, so an optimistic margin here produces an optimistic line and a campaign that quietly loses money.
- The line
- The ROAS your margin demands before a campaign has paid for its goods. It does not move in step with the margin, and that is the whole lesson: going from a 50 percent margin to 25 percent does not move the bar from 2.00x to 2.50x, it moves it to 4.00x.
- Gross margin per ad dollar
- What one advertising dollar brings back in margin rather than in revenue. At a 3.50x ROAS and a 40 percent margin it is $1.40, which is the figure that is either above or below the dollar you spent. Everything else on this page is a restatement of it.
- Required margin
- The gross margin the campaign would need in order to break even where it already sits: 28.6 percent at a 3.50x ROAS. This is the reverse reading, and it is usually the more actionable one, because margin responds to pricing and sourcing while ROAS mostly does not respond to being stared at.
- Headroom
- How many times over your ROAS clears the line. Above 1.00x the campaign is contributing; at 1.00x it is funding itself and nothing else. It answers how far performance can fall before the campaign stops paying for itself.
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The same ROAS, read against different margins
Illustrative arithmetic, not customer data. Every verdict is produced by the same function the calculator above runs.
| Scenario | Gross margin | Break-even ROAS | Their ROAS | Per ad dollar | Verdict |
|---|---|---|---|---|---|
| Apparel brand on a healthy margin | 60% | 1.67x | 2.40x | $0.44 | Above break-even |
| Supplements, high margin and low ROAS | 70% | 1.43x | 1.60x | $0.12 | Above break-even |
| Electronics reseller with a strong-looking ROAS | 20% | 5.00x | 3.50x | -$0.30 | Below break-even |
| Home goods, campaign sitting on the line | 45% | 2.22x | 2.20x | -$0.01 | Sitting on the line |
| Jewellery, margin good and ROAS short | 55% | 1.82x | 1.50x | -$0.17 | Below break-even |
| Print on demand, thin margin and high ROAS | 30% | 3.33x | 4.00x | $0.20 | Above break-even |
Where the break-even line misleads
Break-even is not profitable
A campaign on the line pays for the goods it sold. It contributes nothing to rent, salaries, software or the person running the ads. Treating break-even as the target means running a business that covers its cost of goods and nothing else.
The line assumes the attributed revenue is real
Break-even ROAS is arithmetic on whatever ROAS you feed it, and that figure comes from a platform with an attribution window and an interest in the answer. Clearing the line on a number that is over-claimed is not clearing it.
It is a first-order calculation, not a lifetime one
A store where customers reorder can rationally run below break-even on the first purchase. That is a real strategy, and it needs a repeat-rate figure this tool does not ask for — so read a below-the-line verdict as a question rather than a verdict.
Margins are not one number
Most catalogues have a wide spread, and a campaign that happens to sell the thin end is losing money while the blended margin says it is fine. Running this per product line is more work and a much better answer.
Discounts move the line while the campaign is running
A 20 percent code applied at checkout takes 20 points off the order value the margin was calculated on, which raises the break-even ROAS for exactly the orders the promotion produced. The line you calculated before the sale is not the line during it.
Break-even ROAS questions
How do you calculate break-even ROAS?
Enter your gross margin and the calculator returns the ROAS a campaign has to reach before it has paid for the goods it sold. A 40 percent gross margin breaks even at 2.50x, a 25 percent margin needs 4.00x and a 70 percent margin needs 1.43x. The relationship is not linear: halving your margin doubles the ROAS you need.
What margin should I use?
Contribution margin before advertising, not the markup on the product page. Take out the cost of the goods, payment processing, shipping you absorb, pick and pack, and an allowance for returns. If you only take out the cost of the goods, the break-even ROAS this returns is too low and a campaign that looks profitable is not.
Is a 3.5x ROAS good?
It depends entirely on margin, which is why no honest answer exists in the abstract. At a 20 percent gross margin, break-even is 5.00x, so 3.5x loses 30 cents on every advertising dollar. At a 70 percent margin, break-even is 1.43x, so the same 3.5x is comfortably profitable. The same number is a good month and a bad one.
What margin would I need to break even at my current ROAS?
Add your current ROAS to the calculator and it reports the gross margin that ROAS would need. At 3.5x that is 28.6 percent; at 2.0x it is 50 percent. This is the more useful reading of the two, because margin is the number you can actually change with pricing, sourcing and shipping policy.
Should I run campaigns at break-even?
Sometimes, deliberately. A campaign sitting on the line buys revenue at cost, which can be worth it for a product people reorder or where the first order leads to a second. It is only a mistake when it happens by accident, which is what this tool is for.
Does this tool need my store, an account or an install?
No. It runs in the page, takes one number you already have, and sends nothing about your store anywhere.
Paid traffic that never buys keeps this line out of reach.
Every order won from a visitor already on the store helps clear it. A discount moves the line you just calculated. Nudgesmart attaches the code to the popup that earns it, so the give-away is a decision rather than a leak.
