Breakeven ROAS Calculator

Short answer: breakeven ROAS is the return on ad spend where an order pays for its own advertising and nothing more. The formula is 1 ÷ contribution margin, where contribution margin is your gross margin minus payment fees and any other per-order costs. A store with a 40% gross margin and 5% in fees has a 35% contribution margin, so its breakeven ROAS is 1 ÷ 0.35 = 2.86. Use the calculator below with your own numbers.

Breakeven ROAS calculator

Contribution margin
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Breakeven ROAS
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Target ROAS
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Breakeven cost per order
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The breakeven ROAS formula

Breakeven ROAS = 1 ÷ (gross margin − payment fees − other per-order costs)

Target ROAS = 1 ÷ (contribution margin − the profit you want to keep after ads)

Write every input as a share of the sale price. If a product sells for $100 and costs you $60 to buy and ship to your warehouse, your gross margin is 40%. If card processing takes $3 and pick, pack and outbound shipping you don't charge for cost $5, your contribution margin is 40% − 3% − 5% = 32%, and your breakeven ROAS is 1 ÷ 0.32 = 3.13.

Why the platform's ROAS target is usually wrong

Most stores set a ROAS target from gross margin alone, or copy an industry average. Both leave out costs that come out of every order: card fees, financing fees, free shipping, packaging, apps billed per order, and returns. On a low-margin catalog those costs decide whether ads make money. A store at 20% gross margin breaks even at 5x on gross margin alone, but at 10x once 10% of fees and overhead come out. Bidding to 5x on that store loses money on every sale.

That's the method we use when we set bid targets for Shopify clients: one breakeven number per margin tier, not one blended target for the whole catalog.

How to use breakeven and target ROAS in your ad accounts

  • Group products by margin. A 40% margin brand and a 20% margin brand need different targets. Put them in separate campaigns or asset groups so each can bid to its own number.
  • Set target ROAS above breakeven. Breakeven is the floor. The target is breakeven plus the profit you want to keep.
  • Judge results by your store's orders. Ad platforms tend to over-credit themselves. Compare platform ROAS against Shopify revenue before you raise budgets.
  • Revisit the inputs when costs change. A new supplier price, a shipping rate change or a new financing option changes your breakeven.

FAQ

What is a good ROAS for a Shopify store? There is no single good number. A good ROAS is any ROAS above your breakeven, and your breakeven depends on your margin and costs. A 4x ROAS is profitable at a 40% contribution margin and loses money at 20%.

Is breakeven ROAS the same as MER? No. ROAS measures one channel's ad spend against the revenue that channel claims. MER (marketing efficiency ratio) divides total revenue by total marketing spend. You can use the same breakeven math on MER to check the business as a whole.

Should I include shipping in the calculation? Include any shipping cost you pay and don't pass on to the customer. If customers pay full shipping, leave it out.

What if my breakeven ROAS is very high? Then paid ads only work on your higher-margin products, or you need better margins first. Many stores find that one or two brands or product lines carry the ad budget profitably while the rest should run on organic, email and remarketing.

Want us to set this up in your account?

We build margin-tiered campaigns with breakeven and target ROAS for each product group, and report results against Shopify orders. See our paid media services or start a project.