Breakeven ROAS (Return on Ad Spend) is the minimum ROAS your paid ads need to hit so youdon't lose money on each sale. If your breakeven ROAS is 2.0x, every $1 you spend on ads needs to generate at least $2 in revenue just to cover all your costs — product, shipping, processing fees, taxes, and refunds. Anything above that number is profit.
Breakeven ROAS = Selling Price / (Selling Price - Total Costs Per Unit)
Total costs include cost of goods sold, processing fees, shipping, taxes, refund losses, and any other per-unit expenses. The calculator above handles all of this automatically.
Facebook, TikTok, and Google report ROAS based on revenue alone. They don't know your product costs, Shopify processing fees, shipping expenses, or refund rate. A 3.0x ROAS in Meta Ads Manager might actually be a 1.2x true ROAS once you factor in real costs — meaningyou're barely breaking even while thinking you're profitable.
Say you sell a product for $50 with $10 COGS, $1.75 processing fees (2.9% + 30¢), and a 3% refund rate ($1.50). Your total costs per unit are $13.25, leaving $36.75 in margin before ad spend.
$50 / $36.75 = 1.36x Breakeven ROAS
Under those illustrative costs, a revenue ROAS above 1.36x leaves positive contribution before excluded expenses. Below that,you're losing money on every sale. Use the margin scenarios table above to see how your target ROAS changes at different profit margin levels.
- Enter your selling price and cost of goods sold
- Select your Shopify plan for accurate processing fees
- Add your tax rate and refund rate if applicable
- Enter your monthly ad spend to see how many units you need to sell
- Use the margin scenarios table to find the ROAS target for your desired profit margin
Break-even ROAS = 1 ÷ contribution margin before advertising
If an order produces $40 of contribution from $100 in revenue before advertising, its contribution margin is 40%. Break-even ROAS is 2.5x. A higher target leaves room for profit and any costs you have not included.
Subtract the variable costs included in your model from revenue. Divide that contribution by revenue, then take its reciprocal. Enter margin as a decimal: 40% becomes 0.40.
Use contribution margin before advertising, including the product, fulfillment, payment and refund costs you intend ads to cover. Net margin after advertising creates a circular input.
No positive ad budget can break even on the modeled order alone. Review price and costs before using a ROAS target.
Browse all free ecommerce calculators to compare advertising, pricing and profit assumptions.
