Break-even ROAS
Break-even ROAS is the ROAS at which ad spend exactly equals the gross profit it generates: 1 divided by your gross margin. Below it, you lose money.
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Break-even ROAS
Break-even ROAS is the ROAS at which ad spend exactly equals the gross profit it generates: 1 divided by your gross margin. Below it, you lose money.
Above break-even ROAS, ads add gross profit; below it, each sale costs more in ads than it earns. It turns ROAS from a vanity metric into a business decision, and it is the sensible floor for any Target ROAS. It ignores lifetime value and repeat purchases, so a business with strong repeat buying may choose to accept a lower first-order ROAS.
Where you'll see it
Google Ads, Meta and TikTok don't show it, because they don't know your margins. You calculate it and compare it with "Conv. value / cost" in Google Ads, "Purchase ROAS" in Meta Ads Manager, or ROAS in TikTok Ads Manager.
Worked exampleA $100 product
Product cost, shipping and payment fees total $60, so gross margin is $40 ÷ $100 = 40%.
- Break-even ROAS = 1 ÷ 40% = 2.5
- At ROAS 3.0: $1,000 of spend brings $3,000 revenue and $1,200 gross profit, so $200 is left after ads
- At ROAS 2.0: the same $1,000 brings $2,000 revenue and $800 gross profit, a $200 loss
Get the margin right
- Subtract shipping, fees and returns, or break-even looks lower than it is.
- Use different break-even figures for products with very different margins.
- Treat VAT the same way in conversion values and in margin.
- Platform ROAS may count one sale on several channels, so true ROAS can be lower.