Stop guessing your ad targets. Find the exact ROAS you need before every ad dollar turns into a loss.
Default: 2.9% for Shopify Payments
Most brands pick a ROAS target out of thin air. "We need a 4x ROAS" sounds smart in a meeting, but is 4x actually profitable for your specific product, margins, and costs? Or are you slowly losing money on every sale without realizing it?
Break-even ROAS answers that question. It is the exact minimum ROAS your campaigns must hit before you start losing money on every ad-driven sale. Below this number, each sale from advertising actually costs you money. Above it, you profit. If you do not know yours, you are setting ad budgets based on guesswork — and that guesswork could be silently draining your cash flow.
The formula itself is simple. If your gross margin is 50%, your break-even ROAS is 2x. If your margin is only 25%, you need a 4x ROAS just to stop losing money. This accounts for your per-unit costs — COGS, shipping, and transaction fees — but not overhead like salaries or rent. Think of it as your floor: the line where every dollar below it becomes a direct loss.
Break-Even ROAS = 1 ÷ Gross Margin %
Here is what happens without this number: you scale a campaign because the dashboard shows "4x ROAS" and it feels like a win. But your margins are 20%, so your break-even is actually 5x. You just scaled a money-losing campaign. Knowing your break-even ROAS replaces that gut feeling with math.
A brand with 60% margins only needs 1.67x ROAS to break even — a 3x target gives them real profit headroom. A brand with 20% margins needs 5x just to stop bleeding. Same "4x ROAS," completely different outcomes.
But that is only half the picture. When you scale ad spend, your ROAS almost always drops as you reach broader, colder audiences. Your break-even number tells you exactly how far ROAS can fall before you need to pull back. It is the guardrail between smart scaling and reckless spending. If you work with an agency or media buyer, this should be the first number they calculate — because without it, they have no idea whether "3x ROAS" is a win or a failure for your specific business.
A lower break-even means more profit headroom on every campaign you run. And here is the thing most brands miss: improving your margins by even 10% can turn previously unprofitable campaigns into winners — without touching a single ad. Here are the levers you can pull:
The bottom line: fixing your margins is often more powerful than optimizing your ads. Pair margin improvements with conversion rate optimization and strong ecommerce SEO and you are building a business that does not live and die by your ad spend.
It is the minimum ROAS your ads must hit before you start losing money on every sale. At this exact number, your ad revenue covers the product cost, shipping, transaction fees, and the ad spend — with zero profit and zero loss. Below it, every ad-driven sale costs you money. Above it, you profit.
Divide 1 by your gross margin (as a decimal). First, find your margin: (Selling Price - COGS - Shipping - Transaction Fees) / Selling Price. Then divide 1 by that. Example: 50% margin = 0.50. Break-even ROAS = 1 / 0.50 = 2x. The calculator above does all of this for you automatically.
That is a red flag. Most ad platforms average 3-5x ROAS, so consistently hitting above 5x is tough. Before spending more on ads, fix your unit economics: raise prices, negotiate lower COGS, cut shipping costs, or create bundles. Getting your margins up brings your break-even down — making ads profitable becomes much easier.
No. This gives you your per-unit break-even — covering COGS, shipping, and transaction fees. It does not include fixed costs like salaries, rent, or software. Your real company-wide break-even ROAS is higher. Think of this number as the absolute floor. If you are below it, you are losing money before overhead even enters the picture.
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