How to Calculate Break-Even ROAS (With Examples)

Your break-even ROAS is 1 divided by your contribution margin: if you keep 45 cents of every dollar of sales after product cost, shipping, payment fees and returns, you need $2.22 of revenue for every $1 of ads just to cover the ads. Below that number, every sale loses money, however healthy the ad dashboard looks.

Most guides stop at product margin and skip returns and sales tax. This one gives you the formula, a lookup table, a full worked example and the Black Friday effect. Black Friday falls on November 27, 2026 and Cyber Monday on November 30, so you have six weeks to fix the number before the discounts start.

What is break-even ROAS?

Break-even ROAS is the lowest return on ad spend at which a campaign pays for itself and leaves you with exactly zero profit. The formula is: break-even ROAS = 1 ÷ contribution margin.

ROAS means return on ad spend: the conversion value your ads generate divided by what you spend on them. Google Ads defines the target version as "the average conversion value (for example, revenue) you'd like to get for each dollar you spend on ads," and its own example is $5 in sales ÷ $1 in ad spend × 100% = a 500% target ROAS (Google Ads Help on target ROAS, retrieved October 15, 2026). A 500% target and a 5.0 ROAS are the same number. We use the ratio, 5.0, in the rest of this article.

The contribution margin is the share of each sales dollar left after the costs of producing and delivering the order, before you pay for advertising. If it is 45%, each dollar of revenue leaves 45 cents to pay for ads. To win back $1.00 of ad spend you need $1 ÷ 0.45 = $2.22 of revenue. That is your break-even ROAS: 2.22.

How do you calculate your real contribution margin?

Your contribution margin is what remains of an order after every cost that exists only because the order exists, divided by the revenue the ad platform reports for that order. Start from the price the customer pays, before sales tax, and subtract these items one by one.

• Selling price. The amount your ad platform records as conversion value, after any discount.
• Discounts. A code or sale price lowers the price, not your costs.
• Returns. A refunded order removes its revenue. If the item goes back on the shelf, you also keep its product cost.
• Product cost. What you paid for the units the customer kept.
• Shipping. The postage and packaging you pay, not the shipping fee the customer pays you.
• Payment fees. The processor takes its share of what the customer paid. In our example below, that fee is not refunded when an order comes back.

Contribution per order = revenue kept − product cost − shipping − payment fees. Margin = contribution per order ÷ revenue the platform reports.

Which costs stay out of the calculation?

Leave out the costs that do not change with one more order: salaries, rent, software and your agency retainer. Leave out the ad spend itself, because ROAS already compares revenue with it. Break-even ROAS answers one question: does this order pay for the ad that produced it? Whether the whole business is profitable is a separate calculation.

What is the minimum ROAS for your margin?

For any margin, divide 1 by the margin: a 40% contribution margin gives a minimum ROAS of 1 ÷ 0.40 = 2.50. The table below does the arithmetic for six common margins.

The curve is steep at the bottom. Going from a 30% to a 20% margin lifts the minimum ROAS from 3.33 to 5.00, an increase of 50%.

This is also why two stores with the same ROAS can be in opposite situations. A 2.5 ROAS earns a profit at a 50% margin and loses money at a 30% margin. The number on the dashboard means nothing until you set it against your own margin.

How do you use the table when your margin is not on it?

Divide 1 by your own margin and round to two decimals. A 35% contribution margin gives 1 ÷ 0.35 = 2.86. Test it the other way too: 2.86 × 0.35 = 1.00, so each dollar of ads comes back as exactly one dollar of contribution.

Run the calculation per product or per category when margins differ a lot. A store that sells a $100 item at a 45% margin and a $20 accessory at a 25% margin has two break-even points, 2.22 and 4.00. One blended campaign hides the fact that the accessory loses money at the same ROAS that makes the item profitable.

What does a full calculation look like, and what are the common mistakes?

A full calculation takes five lines of arithmetic. The figures below are example assumptions in US dollars, with prices before sales tax. They are not averages or benchmarks, so replace them with your own.

• Selling price: $100.
• Returns: 10% of orders are returned and fully refunded, and the item goes back into stock.
• Product cost: $40, paid only on orders the customer keeps.
• Shipping: $6 per order, paid by you.
• Payment fees: 3% of the amount collected (an assumption, not a real rate).

In this example, a $100 order leaves $45.00 before ads, so the break-even ROAS is 2.22. Anything below it loses money.

Notice the gap between the 60% product margin ($100 price, $40 cost) and the 45% contribution margin. Returns, shipping and fees took 15 points. Plan on 1.67 and you run at a loss without seeing it.

What are the most common mistakes?

Confusing markup and margin. A $40 product sold at $100 has a 150% markup but a 60% margin. Margin is measured against the selling price, and that is the one ROAS needs.

Ignoring returns, shipping and payment fees. Using the 60% product margin gives a break-even of 1.67. At a real ROAS of 1.9, $1,000 of ads brings $1,900 of revenue and $855 of contribution, a loss of $145.

Comparing revenue that includes tax with costs that do not. The next section covers it.

Aiming exactly at break-even. At 2.22, $1,000 of ads returns about $1,000 of contribution and nothing else. Returns vary from month to month, so you need a margin of safety.

Using platform ROAS without checking it. Platforms count the conversions they attribute to themselves, and their numbers can differ from your store's orders. Check ROAS against actual orders and refunds.

Does ROAS include sales tax?

It depends on how your conversion value is set up, so check what your store sends to your ad platform. In the US, sales tax is added at checkout, varies by state and is collected on behalf of the state, so it is not your revenue. Never count it as revenue or as margin.

The rule is the same for every cost: compare amounts of the same kind. Pre-tax revenue goes with pre-tax costs. If the conversion value your platform records includes tax, ROAS reads higher than your real ROAS, and your break-even looks easier to clear than it is.

Google's help page on cart data parameters shows the principle at item level: the item price is the "sales price of a single item, excluding tax, shipping, and any transaction level discounts" (Google Ads Help on conversions with cart data, retrieved October 15, 2026). We did not find an official statement on how every store setup behaves, so run a test order and compare what the platform records with the pre-tax order total.

Here is the effect with the example. A 2.22 break-even means $1,000 of ads must bring $2,220 of pre-tax sales. A dashboard reading $2,300 passes that test on paper. If tax makes up part of those $2,300, your real pre-tax revenue can sit below $2,220 and the campaign is losing money while the report says it is not.

Why do Black Friday discounts push your break-even ROAS up?

A discount cuts the price but not your costs, so each order leaves less contribution while the ad platform reports less revenue. Product cost and shipping stay at $36 and $6, so the margin shrinks faster than the discount.

Take the same example and discount the price. Returns stay at 10%, payment fees stay at 3% of the discounted price, and the break-even ROAS is the discounted price divided by the contribution per order.

A 20% discount pushes the break-even from 2.22 to 2.90, an increase of 31%. Run the full-price campaign at 2.22 during a 20% sale: $1,000 of ads returns $2,220 of revenue and about $766 of contribution, a loss of roughly $234. To break even on that sale you need $2,900 of revenue.

Your Black Friday targets must be recalculated per offer, not carried over from October. Our guide on how to prepare for Black Friday with customer reviews covers the timing side of the same weeks.

What happens when you stack a free gift on the discount?

Every extra cost per order lifts the break-even again. In the table above, a 20% discount leaves $27.60 of contribution per order. Add a free gift that costs you $5, and contribution falls to $22.60. The break-even becomes $80 ÷ $22.60 = 3.54, against 2.22 at full price.

Offers that look generous to the shopper are paid out of the same contribution that has to cover your ads. Recalculate the break-even for each offer you run, with the price, the gift and the shipping rule of that offer, before you set the campaign target.

GuideFree PDFHow to prepare for Black Friday 2026: slash your prices, not your reputationBlack Friday 2026 falls on November 27: more orders, overloaded carriers and a customer support team under pressure. Our free playbook helps you get through the peak without damaging your rating.Download the guide

Break-even ROAS or target ROAS: what is the difference?

Break-even ROAS is the line where profit is zero. Target ROAS is the return you set as your goal, and it sits above break-even by the profit or safety margin you want.

In the example, break-even is 2.22. If you want a cushion for return rates that move, you set the target above it, say 2.6. If you want a profit of 10 cents per dollar of ads, the arithmetic is: revenue needed per dollar of ads = $1.10 ÷ 0.45 = 2.44. Those are your own choices, and we give no "good ROAS" figure because no number is good without your margin.

The two numbers play different roles. Break-even tells you where you lose money and acts as your floor. The target tells your campaigns what to aim for, and it is the figure you enter if you use a target-based bidding strategy such as the one Google describes.

If your target is at or below break-even, you are asking the platform to find sales that lose money. Set the floor first, then the target above it.

How do you clear break-even without raising your ad budget?

You clear break-even by changing the variables in the equation, not by spending more: price, average order value, conversion rate and returns. A bigger budget buys more of the same ratio, so it grows losses as fast as it grows revenue when you are under break-even.

• Price. A 5% price increase raises revenue per order and contribution together.
• Average order value. A higher basket spreads shipping and fixed per-order costs over more revenue. See how to calculate your average order value.
• Returns. Every point of returns you avoid goes straight back into the margin.
• Conversion rate. The same ad click produces more orders. See how to calculate your conversion rate.

Could reviews help you clear break-even?

This is a hypothesis, not a result. If reviews help your product pages convert, they work on the one variable that raises ROAS without a higher budget. Here is the arithmetic, labeled as an example.

Example: at constant traffic and average order value, going from a 2.0% to a 2.4% conversion rate lifts revenue by 20%. A 2.0 ROAS becomes 2.4, which clears a 2.22 break-even. On $1,000 of ads, revenue moves from $2,000 to $2,400, and contribution moves from $900 (a loss of $100) to $1,080 (a profit of $80).

Whether your reviews move your conversion rate is something you test on your own store. Read more on how customer reviews can strengthen your ads.

How does Review Collect help you clear break-even?

Review Collect collects customer reviews after each order and distributes them to Google, Trustpilot and other platforms, for any industry and any country. It is not a review platform. It feeds the platforms your customers already trust.

If you advertise, those fresh reviews matter on the page your ads send people to. A shopper who clicks an ad often checks the ratings before buying. If recent public ratings help that visitor decide, the conversion rate moves, and as the example in the previous section shows, a higher conversion rate is a direct route past break-even.

Review Collect multiplies review volume by 30 in 30 days, in the first month. Our review collection tool sends the request after delivery, so the customers who are satisfied can post on the platform you choose. When a customer is unhappy, the feedback goes by email to your support team with the order details, and the customer can still publish a review.

For stores that run paid campaigns, our PPC and Ads solution shows how reviews and ads work together. We cannot promise you a ROAS. The effect on your conversion rate is yours to measure, and the break-even formula above tells you the number to measure it against.