Calculate Break-even ROAS
Profit/Loss Chart
Understanding Your Break-even ROAS Results
BEROAS < 2.0 (200%): High Margin
Your profit margin is above 50%, making it relatively easy to profit from advertising. You have significant room for ad spend and can afford higher customer acquisition costs. This is ideal for scaling campaigns. Focus on increasing ad spend while maintaining efficiency. Consider testing new channels and audiences.
BEROAS 2.0-4.0: Moderate Margin
Your profit margin is between 25-50%, which is typical for most ecommerce businesses. You need efficient advertising to be profitable. Focus on optimizing ad targeting, improving conversion rates, and reducing costs where possible. Monitor campaigns closely and pause underperformers quickly. Consider negotiating better supplier prices or shipping rates.
BEROAS > 4.0 (400%): Low Margin
Your profit margin is below 25%, making it very challenging to profit from paid advertising. You're operating on thin margins and have little room for error. Consider increasing product prices, reducing costs, or focusing on organic traffic and email marketing instead of paid ads. Paid advertising may not be sustainable for this product.
What is Break-even ROAS (BEROAS)?
Break-even ROAS Calculation Examples
Dropshipping Store
A dropshipping store sells a product for $40 with $20 product cost, $8 shipping, and 3% platform fees.
Calculation Steps
- Total Costs: $20 + $8 + ($40 × 0.03) = $29.20
- Profit Margin: ($40 - $29.20) / $40 = 27%
- Break-even ROAS: 1 / 0.27 = 3.7:1 (370%)
Ecommerce Brand
An ecommerce brand sells for $100 with $30 cost, free shipping, and no platform fees.
Calculation Steps
- Total Costs: $30 + $0 + $0 = $30
- Profit Margin: ($100 - $30) / $100 = 70%
- Break-even ROAS: 1 / 0.70 = 1.4:1 (140%)
Low-Margin Product
A competitive product sells for $25 with $18 cost, $5 shipping, and 2.5% fees.
Calculation Steps
- Total Costs: $18 + $5 + ($25 × 0.025) = $23.63
- Profit Margin: ($25 - $23.63) / $25 = 5.5%
- Break-even ROAS: 1 / 0.055 = 18.2:1 (1820%)
How to Calculate Break-even ROAS
Calculate total costs
Add product cost, shipping, platform fees, and other expenses
Calculate profit margin
Subtract total costs from product price, then divide by product price
Calculate BEROAS
Divide 1 by your profit margin (as a decimal)
Interpret the result
Lower BEROAS = higher profit margin = easier to profit from ads
Why Break-even ROAS Matters for Ecommerce
Set Realistic Ad Budgets
Know exactly how much you can afford to spend on advertising per sale without losing money. This prevents overspending on unprofitable campaigns.
Evaluate Campaign Performance
Quickly determine if your ads are profitable by comparing actual ROAS to break-even ROAS. Any campaign below BEROAS is losing money.
Optimize Profit Margins
Identify which costs to reduce (shipping, platform fees, product cost) to lower your break-even point and increase profitability.
Scale with Confidence
Once you're above break-even ROAS, you can confidently scale ad spend knowing each additional sale generates profit.
Understanding BEROAS Calculator Parameters
Product Price
The selling price of your product to customers. This is the revenue you receive per sale before any costs are deducted. Use the actual price customers pay, excluding taxes and shipping charges (unless shipping is included in the product price). For variable pricing, use your average selling price.
Product Cost
The cost to acquire or manufacture the product, including supplier cost, manufacturing, and packaging. For dropshipping, this is what you pay your supplier. For brands, include raw materials and production costs. Do not include shipping, platform fees, or advertising costs here.
Shipping Cost (Optional)
The cost to ship the product to your customer. If you offer free shipping, enter the actual shipping cost you pay. For dropshipping, this is often included in supplier cost. If shipping varies, use your average shipping cost per order.
Platform Fees (Optional)
Percentage fees charged by your selling platform (Shopify, Amazon, eBay, etc.). Include payment processing fees if applicable. For example, Shopify charges ~2.9% + $0.30 per transaction. Enter as a percentage of product price.
Other Costs (Optional)
Any additional per-order costs not covered above, such as packaging materials, fulfillment fees, transaction fees, or customer service costs. Enter the total dollar amount per order.
Break-even ROAS Formula
Profit Margin Formula
Calculate your profit margin by subtracting all costs from product price, then dividing by product price. For a $50 product with $31.50 in total costs: ($50 - $31.50) / $50 = 37% profit margin.
Profit Margin = (Revenue - Total Costs) / Revenue
Example: ($50 - $31.50) / $50 = 0.37 = 37%
Break-even ROAS Formula
Your break-even ROAS is the inverse of your profit margin. With a 37% profit margin: 1 / 0.37 = 2.70, meaning you need at least $2.70 in revenue for every $1 spent on ads to break even.
BEROAS = 1 / Profit Margin
Example: 1 / 0.37 = 2.70 (270% or 2.7:1)
Max Ad Spend Formula
The maximum you can spend on advertising per sale while breaking even. With a $50 product and $31.50 in costs, you can spend up to $18.50 on ads per sale.
Max Ad Spend = Product Price - Total Costs
Example: $50 - $31.50 = $18.50
Frequently Asked Questions
Break-even ROAS is the minimum Return on Ad Spend needed to cover all costs and achieve zero profit. It's calculated as 1 divided by your profit margin. For example, with a 25% profit margin, your break-even ROAS is 4:1 (400%).
Calculate your profit margin: (Product Price - Total Costs) / Product Price. Then divide 1 by your profit margin. For a $50 product with $37.50 in costs: Profit Margin = 25%, BEROAS = 1 / 0.25 = 4:1.
ROAS measures your actual return on ad spend, while break-even ROAS is your target minimum. If your ROAS is above break-even, you're profitable. If it's below, you're losing money on ads.
Lower is better. A BEROAS of 2:1 (50% margin) is excellent, 3:1 (33% margin) is good, and above 4:1 (25% margin) is challenging. Dropshipping typically has 3-6:1 BEROAS, while brands may have 1.5-2.5:1.
Always target higher than break-even. Aim for at least 20-30% above your BEROAS to account for refunds, chargebacks, and profit goals. If your BEROAS is 3:1, target 3.6-4:1 actual ROAS.
Increase profit margin by: raising prices, negotiating lower supplier costs, reducing shipping costs, switching to lower-fee platforms, or bundling products. Even small margin improvements significantly lower BEROAS.
Disclaimer
This break-even ROAS calculator provides estimates for educational purposes only. Actual profitability depends on your specific business model, costs, pricing, and market conditions. Results do not account for refunds, chargebacks, customer lifetime value, or other business factors. Always consult with a financial advisor or accountant for business decisions. We are not responsible for any financial decisions made based on these calculations.