Break-even ROAS: the lowest return on ad spend that still makes money

Break-even ROAS = selling price ÷ profit per sale before advertising. Below that ROAS, every sale that comes from an ad loses money. Above it, ads add profit.

Start with profit before ads

ROAS (return on ad spend) is sales divided by ad spend. On its own it says nothing about profit — that depends on how much each sale leaves after product cost and fees. So the first step is:

Profit before ads = price without tax − product cost − other costs per order − fees

Example, selling for $40 with no sales tax in the calculation:

	Amount
Selling price	$40.00
Product cost	−$18.00
Shipping and packaging	−$6.00
Marketplace commission, 15%	−$6.00
Profit before ads	$10.00

The break-even point

You can spend up to $10 on ads to win one sale and still break even:

• Maximum ad spend per sale = $10.00
• Break-even ROAS = $40 ÷ $10 = 4.00
• Break-even ACoS = $10 ÷ $40 = 25% (ACoS is the inverse of ROAS)

Why a “good” ROAS can lose money

A ROAS of 3 sounds healthy. For this product it means spending $13.33 on ads for each $40 sale ($40 ÷ 3). With only $10 of profit before ads, each ad-driven sale loses $3.33. Whether a ROAS is good depends entirely on the product’s margin.

ROAS for a target profit

If you want to keep $4 from each ad-driven sale, you can spend $10 − $4 = $6 on ads:

Target ROAS = price ÷ (profit before ads − target profit) = $40 ÷ $6 = 6.67

VAT changes the number

In VAT countries, ad platforms often report sales including VAT, while your revenue excludes it. Use the same basis on both sides: if the platform shows the VAT-inclusive value, enter the VAT-inclusive price in the ROAS calculator and the VAT rate, and it will remove the tax before working out your profit.

Things to keep in mind

• This is per sale. Ads can also bring repeat customers or organic sales, which a per-sale break-even ignores.
• Returns lower your real profit per sale. If you have a high return rate, check the profit calculator first and use its profit figure.