What is Breakeven ROAS?
Breakeven ROAS (Return On Ad Spend) is the minimum ratio between your revenue and your ad spend to not lose money. Below this threshold, every ad-generated order costs you money. Above it, you profit.
It's the most important metric for any e-commerce merchant running paid ads. Without it, you're flying blind.
The exact Breakeven ROAS formula
Breakeven ROAS = Selling price ÷ (Selling price − Total costs excluding ads)
Total costs include: product cost (COGS), shipping fees, payment fees (Stripe, PayPal), platform fees (Shopify), and VAT if applicable.
Concrete example: you sell a product for $39.90. Product cost is $12, shipping $5, Stripe fees $1.16, Shopify $0.80, VAT (20%) $6.65. Your margin before ads = 39.90 − 12 − 5 − 1.16 − 0.80 − 6.65 = $14.29. Breakeven ROAS = 39.90 ÷ 14.29 = 2.79x.
How to use Breakeven ROAS to scale
Once you know your breakeven, you have a clear rule for your media buying decisions. If your ROAS is above breakeven, you can increase budget. If it's below, you need to optimize or cut.
The classic mistake is looking at gross ROAS (from Meta) and believing you're profitable. With a breakeven of 2.79x, a Meta ROAS of 3x looks good — but if the real ROAS is 40% lower (roughly 1.8x), you're losing money on every order.
Common calculation mistakes
Mistake #1: forgetting payment fees. Stripe takes 2.9% + $0.30 per transaction, PayPal 3.4%. On a volume of 1,000 orders per month, that's thousands of dollars.
Mistake #2: ignoring VAT. If your prices include VAT (which is the case for most B2C stores in Europe), you must deduct VAT from your selling price before calculating margin. A product at €39.90 including 20% VAT is actually €33.25 excluding VAT.
Mistake #3: not accounting for returns. If your return rate is 5%, that's 5% less margin across all your sales. Use our free calculator to get the exact number.
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