Break-even ROAS: How to Calculate It for Your Shopify Store

By Milo TranOctober 28, 20268 min read

Balance scale weighing ad spend against order profit, labelled Break-even ROAS

A 3x ROAS can still lose money if your costs eat more than two-thirds of every order. Break-even ROAS is the return on ad spend at which an order stops losing money, and you calculate it as 1 ÷ your margin before ad spend.

The sections below list the costs that go into that margin, work through a $60 order, and turn the result into a target ROAS for your campaigns.

What Is Break-even ROAS?

Break-even ROAS is the return on ad spend at which the profit from an order exactly covers the ad cost of getting it. Above that number, each ad-driven order adds profit. Below it, each order loses money, even when the ad platform reports a "good" ROAS.

ROAS itself is revenue divided by ad spend, as our guide to what ROAS means and how it's measured explains. ROAS ignores what the product cost you to make, ship, and sell. Break-even ROAS adds those costs back in, so it's different for every store, and often for every product.

The Break-even ROAS Formula

Break-even ROAS is 1 divided by your profit margin before ad spend:

Break-even ROAS = 1 ÷ Margin before ad spend

Margin before ad spend = (Average Order Value − Variable costs per order) ÷ Average Order Value

Average Order Value, or AOV. The revenue you collect per order, after discounts.
Variable costs per order. Every cost that grows with each order you ship, except advertising.
Margin before ad spend. The share of each order's revenue left to pay for ads and profit, written as a decimal, so 50% is 0.50. Accountants call this the contribution margin ratio, with advertising left out of the variable costs.

The formula works because at break-even, ad spend equals the money left over after variable costs. If 50% of each order is left, you can spend up to 50 cents on ads per dollar of revenue, which is a ROAS of 2.

Here is how break-even ROAS changes with margin:

Margin before ad spend	Break-even ROAS
20%	5.00
30%	3.33
40%	2.50
50%	2.00
60%	1.67
70%	1.43

Which Costs to Include

Break-even ROAS is only as accurate as the costs you put into it. For a Shopify store, the variable costs per order usually include:

COGS. The product cost from your supplier or manufacturer.
Shipping. What you pay the carrier or fulfillment partner, minus any shipping fee the customer pays.
Transaction fees. Payment processing fees and any Shopify transaction fee on your plan.
Packaging and handling. Boxes, inserts, and per-order pick-and-pack fees.
Refunds and returns. The average amount you lose per order to refunds, return shipping, and items you can't resell.
Per-order app or service fees. Anything billed per order or as a percentage of sales.

Leave fixed costs such as your Shopify subscription, monthly apps, salaries, and rent out of the per-order formula. Those don't change when one more order ships. You cover them with total profit across the month, which is why your target ROAS should sit above break-even.

How to Calculate Break-even ROAS, Step by Step

Say your Shopify store sells a skincare set with an average order value of $60. These numbers are hypothetical, so swap in your own.

Per-order item	Amount
Average Order Value	$60.00
COGS	$18.00
Shipping	$7.00
Transaction fees	$2.10
Packaging and handling	$0.90
Refunds and returns, average per order	$2.00
Total variable costs	$30.00

Subtract variable costs from AOV. $60 − $30 = $30 left per order to pay for ads and profit.
Divide by AOV to get the margin before ad spend. $30 ÷ $60 = 0.50, or 50%.
Divide 1 by that margin. 1 ÷ 0.50 = 2.0.

This store's break-even ROAS is 2.0. A campaign at 2.0 ROAS spends $30 on ads for each $60 order, and the order earns exactly $0. At 1.6 ROAS, each order loses $7.50. At 3.0 ROAS, each order makes $10 before fixed costs.

The same $30 is your break-even CPA, or cost per acquisition. It is the most you can pay in ads to get one $60 order without losing money. If your ad platform optimizes for cost per purchase, that is the number to compare against.

Try it with your own numbers. The calculator below starts from the example and updates as you type.

Break-even ROAS calculator

Enter your own per-order numbers. The starting values are the hypothetical example above.

Average Order Value$COGS per order$Shipping per order$Transaction fees per order$Packaging and handling$Refunds and returns, average per order$Target net profit margin%

Break-even ROAS

2.00

Target ROAS for a 15% net profit margin

2.86

Variable costs per order: $30.00
Left for ads and profit: $30.00
Margin before ad spend: 50.0%
Break-even CPA, max ad spend per order: $30.00
Max ad spend per order at target: $21.00

Once you know your break-even ROAS, the TrueProfit ROAS calculator works out the ROAS a campaign returned from its revenue and ad spend, so you can compare the two.

From Break-even ROAS to Target ROAS

At break-even, ad-driven orders pay for themselves and nothing else. To cover fixed costs and keep a profit, set a target ROAS with the net profit margin you want per order:

Target ROAS = 1 ÷ (Margin before ad spend − Target net profit margin)

In the example, if you want to keep 15% of each order as net profit before fixed costs, the target ROAS is 1 ÷ (0.50 − 0.15) = 1 ÷ 0.35 ≈ 2.86. In dollars, that means spending no more than $21 on ads per $60 order and keeping $9.

Whether 2.86 is realistic for your niche and platform is a separate question. Our guide to what counts as a good ROAS covers the benchmarks.

If you use Google Ads' Target ROAS bid strategy, enter the target as a percentage. Google Ads Help describes a target ROAS of 500% as $5 in conversion value for each $1 spent, so a target of 2.86 is about 286%.

When Break-even ROAS Can Mislead You

Five things can make your break-even ROAS wrong, or the ROAS you compare it with:

Platform-reported ROAS isn't your real ROAS. Each ad platform counts the conversions it takes credit for, and two platforms can claim the same order. Compare break-even ROAS with ROAS built from your actual Shopify orders, or with blended MER, which is total revenue ÷ total Ad Spend across all channels.
Gross margin leaves costs out. If you subtract only COGS, a product with a 70% gross margin looks like it breaks even at 1.43. Take off shipping, fees, and refunds too and its margin may drop to 50%, which needs 2.0. Using gross margin makes losing campaigns look profitable.
Your margin differs by product. A store-wide break-even ROAS hides products with thin margins. If one product line has 30% margin before ads, its break-even ROAS is 3.33, not 2.0.
Repeat customers change the math. If new customers come back and buy again, you can accept a first-order ROAS below break-even and recover the cost later. Only do this if you know your Customer Lifetime Value from your own order history.
Costs move. Supplier prices, shipping rates, and refund rates change. Recalculate break-even ROAS when any of them shift, not once a year.

Keep Break-even ROAS Current With TrueProfit

Your break-even ROAS goes stale every time a supplier, carrier, or app changes its price. In TrueProfit, you can record costs beyond COGS, shipping, and transaction fees as Custom Costs. A Custom Cost can be fixed, with a recurring schedule, or variable, set as a percentage of revenue, COGS, profit, or a specific ad platform's spend. TrueProfit factors those costs into your Net Profit. Once you know your break-even ROAS, you can check whether your campaigns still leave Net Profit after your fixed costs and the other costs you've recorded.

Install TrueProfit from the Shopify App Store to track your Net Profit with the costs you've synced and recorded.

Conclusion

Start with your best-selling product. List its variable costs per order, divide what's left by the price, and take 1 ÷ that margin. Then put the result next to the ROAS your campaigns for that product reported last month. Any campaign below break-even loses money on each order unless repeat purchases pay it back.

Break-even ROAS FAQs

What is a good break-even ROAS?

There is no good or bad break-even ROAS. It comes from your margins. A lower break-even ROAS means you have more room to spend on ads, because each order has more margin left before advertising. Stores with high margins can break even at a lower ROAS than stores with thin margins.

Is break-even ROAS the same as ROAS?

No. ROAS measures what a campaign returned, as revenue divided by ad spend. Break-even ROAS is the minimum ROAS your store needs so that ad-driven orders don't lose money. You compare the first against the second.

Should I include fixed costs in break-even ROAS?

Not in the per-order formula. Fixed costs such as subscriptions and salaries don't change with each order. Cover them by setting a target ROAS above break-even, so the extra margin on every order adds up to more than your monthly fixed costs.

What is the difference between break-even ROAS and MER?

Break-even ROAS is a threshold calculated from your margins. MER, or Marketing Efficiency Ratio, is a result. It is total revenue divided by total Ad Spend across all channels. You can compare your MER with your break-even ROAS to check whether your advertising as a whole is profitable.

How often should I recalculate break-even ROAS?

Recalculate it whenever a cost in the formula changes, such as a new supplier price, a shipping rate change, a different refund rate, or a price change on your product. If nothing obvious changed, recheck it when you review each month's profit.

Milo Tran

Content Marketer at TrueProfit & eCommerce Operator

Milo Tran

Content Marketer at TrueProfit & eCommerce Operator

I’m part of the TrueProfit content team, but before that, I’m an eCom nerd with 3 years of hands-on experience. I’ve done a bit of everything, but running high-performing ads and making sense of the numbers? That’s my thing. If it’s written here, it’s because I’ve lived it.

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