How to Calculate Break-Even ROAS: Formula & Examples [2025]

When I first started running ads, I didn’t know how to calculate break-even ROAS. I tracked spend and clicks, but I had no idea if I was actually covering costs. 

In this guide, I’ll break down what break-even ROAS means, what standard ROAS is, and how to calculate the required break-even ROAS with examples.

What is break-even ROAS?

Break-even return on ad spend (ROAS) is the point where your ad revenue equals your ad spend. You’re not in profit yet, but you’re not losing money either. For example, if your break-even ROAS is 2.5, it means you need $2.50 in revenue for every $1 you spend on ads just to cover costs.

I learned this the hard way when I scaled a campaign that looked strong on the surface. Clicks and sales were coming in, but once I compared revenue against spend, I realized I was under my break-even number. The campaign wasn’t profitable at all. It was just breaking even, and in some cases, losing money.

It’s easy to confuse break-even ROAS with profitable ROAS. The difference is that break-even sets the minimum threshold to stay afloat, while profitable ROAS is anything above that number. If your break-even is 2.5 and your campaigns hit 3.2, you’re making money. If they drop to 2.2, you’re losing money.

This metric is useful because it gives you a clear benchmark. You can set campaign goals, spot problems early, and make faster calls on whether to adjust creative, budgets, or targeting. 

The one limitation to keep in mind is that break-even ROAS doesn’t capture everything. Break-even ROAS leaves out key factors like overhead, lifetime value, and delayed revenue. Treat it as a baseline, not the full picture.

What is a good break-even ROAS?

A good break-even ROAS is 1.0 (a 1:1 ratio or 100%), meaning every dollar of ad spend leads to a dollar of revenue. For example, if revenue is $1000 and ad spend is $1000, then you have a break-even ROAS of 1. 

While break-even is always 1.0, what counts as a good ROAS depends on your margins:

• High-margin products (digital goods): 2.0 – 2.5+
  
  
• Mid-margin ecommerce (apparel, consumer goods): 2.0 – 5.0
  
  
• Low-margin categories (FMCG, retail): 5.0 – 10.0+

I pulled these ranges by applying the break-even formula to margin data I’ve seen across ecommerce, retail, and digital product categories. Platforms like Meta Ads Manager, Shopify, and Triple Whale make it easy to spot these patterns when you’re working with different ecommerce advertising platforms.

I’ve also learned not to lean too hard on averages. They can give you a ballpark, but they don’t reflect the reality of your costs. The only number that really matters is the one you calculate for your own business. That’s the baseline I use when deciding whether a campaign is doing its job or if something needs fixing.

How to calculate required break-even ROAS (Formula + examples)

Before calculating the required break-even ROAS, you need to know how regular ROAS works.

The standard ROAS formula is: ROAS = Revenue from Ads / Ad Spend

Here’s an example to calculate standard ROAS:

• Revenue from Ads = $1,500
• Ad Spend = $500
• ROAS = 3.0

This means you made $3 in revenue for every $1 spent on ads. That’s profitable. But to know the minimum ROAS you must hit just to avoid losing money, you need the break-even formula.

Required break-even ROAS formula

Now use this simple break-even ROAS formula to find your break-even ROAS point:

Required Break-even ROAS = 1 + Gross Margin (%)

Your gross margin is the percentage of revenue you keep after subtracting product costs (and shipping, if you’re covering that too). 

The formula for Gross Margin (%) is:

Gross Margin (%) = (Revenue – Cost of Goods Sold) ÷ Revenue

Now, if math isn’t your strength, check out more examples to ensure this makes sense. 

Break-even ROAS examples

Let’s look at how required break-even ROAS works in practice with real numbers.

For example, you could be selling a physical product like $100 pair of running shoes. It costs you $40 to produce and ship each pair. 

How to calculate the required break-even ROAS for a physical product:

• Revenue = $100 (pair of running shoes)
  
  
• Cost of goods = $40 (production & shipping)
  
  
• Gross margin = ($100 – $40) / $100 = 0.60 or 60%
  
  
• Break-even ROAS = 1 / 0.60 = 1.67

So, for every $1 you spend on ads, you need to earn $1.67 just to break even.

Or let’s say you’re running paid ads to a $49/month subscription. On average, customers stick around for 5 months, so the lifetime value is $245. Let’s say your service costs you $95 to deliver over those 5 months. 

Let’s calculate the required break-even ROAS for a subscription service:

• Revenue = $245
  
  
• Cost = $95
  
  
• Gross margin = ($245 – $95) / $245 = 0.61 or 61%
  
  
• Break-even ROAS = 1 / 0.61 = 1.64

In this scenario, your ads need to earn at least $1.64 in revenue for every $1 spent to break even.

Different approaches to calculating break-even ROAS

I’ve seen marketers run this calculation in a few ways, depending on how their business works:

• First-order revenue only: The most basic version. You take the selling price minus the cost of goods and divide. This works fine if you’re selling one-off products with little repeat business.
  
  
• Lifetime value included: Subscription companies or brands with strong repeat customers often factor in how much a customer spends over time. Using lifetime value lowers your break-even ROAS because you’re spreading acquisition costs across multiple purchases.
  
  
• All costs included: Some teams add shipping, payment processing fees, and even creative production costs into the “cost of goods.” This gives a stricter break-even number, which can help if your margins are thin.
  
  
• Simplified costs only: Others leave out things like overhead or creative costs and stick to pure product costs. That makes the math easier but risks painting a rosier picture than reality.

None of these methods is ‘wrong,’ but the right approach for you depends on how predictable your customer base is and how tight your margins are.

What happens if you’re below break-even ROAS?

If you’re below break-even ROAS, your ads lose money. You spend more to get customers than they return in revenue, and costs pile up the longer it goes on.

I’ve made this mistake before and let a campaign run too long. By the time I caught it, my spend had ballooned while my sales unfortunately stayed flat.

Here’s what to check when you’re under break-even:

• Pause and review campaigns: Confirm your targeting, platform, and offer align with the right audience.
  
  
• Verify your margins: Double-check product, shipping, and fulfillment costs since even small changes affect break-even ROAS.
  
  
• Audit your creative: Use Bestever to spot underperforming ads. Sometimes the issue is creative, other times CPC is too high. If you’re running Facebook ads, compare your CPC to current benchmarks so you know if rising costs are the problem.
  
  
• Test new offers or pricing: Try bundles, discounts, or updated landing pages if your core product and creative look solid.
  
  
• Check your ad attribution: Your campaigns can look worse than they are if tracking misses earlier touchpoints. If you only rely on the last click model, you risk undervaluing ads that built awareness earlier in the funnel.

Adjust your ROAS target as your business evolves

Break-even ROAS isn’t something you calculate once and forget. I’ve learned the hard way that margins, discounts, and costs can change overnight, and if you don’t update your break-even number, you risk running ads on outdated math.

During a flash sale, my margins dropped fast. On paper, my ROAS looked fine, but in reality, I was losing money because I hadn’t adjusted my break-even target. Since then, I’ve built a habit of recalculating whenever key parts of the business shift.

If you want to avoid running on inaccurate math, here’s a simple checklist you can use to keep your break-even ROAS accurate:

• Product or shipping cost changes: Recalculate the margin right away.
  
  
• Discounts or promotions: Update with the new average order value.
  
  
• Platform or payment fees: Factor these into your costs.
  
  
• Creative or overhead spend: Add them if they impact customer acquisition cost.
  
  
• Bundles or multi-item baskets: Base the calculation on the basket margin, not a single product.
  
  
• Customer lifetime value: Use CLV when repeat purchases are reliable; stick to first-order value if they’re not.

Here’s a tip: Treat break-even ROAS as a live metric, not a static one. Your true ROAS shifts whenever product costs, discounts, or repeat purchases change. Update it often to keep your decisions grounded in real numbers.

How Bestever can help you hit break-even ROAS

Knowing how to calculate break-even ROAS gives you the number you need to stay afloat, but hitting it in practice depends on how well your ads perform. I use Bestever to see which creatives push ROAS up and which ones hold it back, so I can adjust campaigns before costs overtake revenue.

We designed Bestever to give you that same clarity. Here’s how it can help you:

• Analyze your ads' effectiveness: Bestever’s Ad Analysis Dashboard gives you instant feedback on an ad's Visual Impact, Brand Alignment, Sales Orientation, and Audience Engagement. It’ll even break down each element in detail. 
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• Get suggestions to improve every frame: If an ad isn’t hitting the mark, ask Bestever to tell you what’s wrong and get instant, actionable suggestions on what to do to fix it. No more guessing or wasting time, your team can start fixing those issues asap. 
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• Understand your audience: Bestever’s audience analysis tools go beyond sharing standard demographics, helping refine both targeting and messaging. You can share your website URL or integrate it with your ad manager, and it’ll quickly let you know who wants to hear more from you. 
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• Rapid asset generation: Fetch AI-generated images, stock photos, and video clips that all fit your brand voice. Then you can share the creatives with your team to make multiple ad variations faster.

• Instant feedback loop: Know immediately why an ad variant underperforms, then pivot before wasting your budget.

Want to see how your ads stack up against your break-even ROAS? Let our team show you how Bestever breaks down your creatives, highlights what drives returns, and gives you clear steps to keep campaigns profitable.

 Schedule a free demo of Bestever now.

Frequently asked questions

What’s the difference between ROAS and ROI?

ROAS only measures ad revenue against ad spend, while ROI includes all business costs to show overall profitability. ROAS tells you how effective your ad spend is, while ROI provides a broader view by factoring in expenses like product, team, and software.

Can creative testing help improve ROAS?

Yes, creative testing can improve ROAS because it shows you which ads drive engagement and conversions. Strong creatives lead to higher click-through rates and lower customer acquisition costs. Testing also helps you replace underperforming ads before they waste budget. 

Is break-even ROAS different for ecommerce vs. SaaS?

Ecommerce includes product costs and shipping, while SaaS accounts for support, onboarding, and churn, so each model has different margins and a different break-even ROAS. These differences change the margin, which shifts the break-even number.

Should I include shipping costs in my ROAS formula?

Yes, you should include shipping costs in your ROAS formula if you cover them. Add shipping to your cost of goods so your gross margin and break-even number reflect reality. Leaving it out makes your ROAS look better than it actually is.

What’s the fastest way to fix a declining ROAS?

The fastest way to fix a declining ROAS is to audit your creatives. Update hooks, headlines, or offers and test quickly. Then check your landing page to make sure it matches the ad. Following Google Ads best practices, like aligning keywords with landing pages and running regular creative tests, also helps you stabilize performance and lift results.

What’s more important: ROAS or conversion rate?

ROAS is more important than conversion rate because it shows if your ads are profitable. Conversion rate only shows how well your page performs. You can have a high conversion rate but still lose money if your ads cost too much, which is why ROAS gives the full picture.