ProfitSimple

How to Calculate Your Break-even ROAS

Your break-even ROAS is net revenue divided by the contribution left before advertising. Work out what one order leaves after VAT, COGS, shipping, packaging, payment fees and other variable costs, and the ratio falls out of it — no benchmark required.

Break-even ROAS formula

Net revenue = price charged − VAT (when the price includes it)

Contribution before advertising = net revenue − non-advertising variable costs

Net break-even ROAS = net revenue ÷ contribution before advertising

Gross break-even ROAS = VAT-inclusive selling price ÷ contribution before advertising

Non-advertising variable costs are COGS, shipping, packaging, payment fees and any other per-order cost. Payment fees are charged on the full amount collected, VAT included, so they are a percentage of the charged price plus a fixed fee.

The distinction between net and gross matters when you compare the result with Meta or Google Ads. Those platforms report whatever purchase value your store sends them, which for VAT-inclusive pricing includes VAT. Judging profitability against the net figure while your platform reports gross revenue makes campaigns look better than they are. With no VAT the two numbers are identical.

Break-even ROAS example

Break-even ROAS worked example
StepAmount
Gross selling price (incl. 21% VAT)€79.00
− VAT− €13.71
= Net revenue€65.29
− COGS− €24.00
− Shipping− €4.50
− Packaging− €1.20
− Payment fees (1.5% + €0.25)− €1.44
− Other variable costs− €0.00
= Contribution before advertising€34.15
Resulting break-even ROAS
MetricResult
Contribution margin before advertising52.3%
Net break-even ROAS1.91×
Gross break-even ROAS2.31×
Break-even CPA€34.15

These figures come from the same engine that powers the Break-even ROAS Calculator, so the guide and the tool can never disagree.

What does break-even ROAS mean?

  • At 1.91×: contribution after advertising is €0 — the order paid for itself and nothing more.
  • Below it: negative contribution after advertising.
  • Above it: positive contribution after advertising.

This is contribution break-even, not company-level net-profit break-even. Fixed costs — salaries, rent, software, agencies — are paid out of contribution earned above this line, so the store needs to run meaningfully above break-even to make a net profit.

Why gross margin alone gives you the wrong ROAS target

Taking selling price minus COGS and stopping there ignores shipping, packaging, payment fees and other variable costs. In the example above those add €4.50 + €1.20 + €1.44 per order on top of COGS. Leaving them out inflates the contribution you think each order produces, which lowers your apparent break-even ROAS and raises the CPA you believe you can afford. The result is campaigns that clear the target on the dashboard and lose money in the bank account.

How can you lower your break-even ROAS?

  • improve product margin through sourcing or pricing
  • increase AOV without proportionally increasing variable costs
  • reduce fulfilment cost per order
  • reduce payment cost per transaction
  • reduce discounting, which cuts revenue while costs stay fixed

Related numbers

Break-even ROAS sets the floor. To set a target that also leaves profit, use the Target CPA Calculator, and to see how much room each order leaves in the first place use the Contribution Margin Calculator.

Calculate your number

Use the free ProfitSimple calculator with your own price, VAT rate and per-order costs.

Break-even ROAS Calculator

Frequently asked questions

What is the break-even ROAS formula?
Net break-even ROAS = net revenue ÷ contribution before advertising, where contribution before advertising is net revenue minus COGS, shipping, packaging, payment fees and other variable costs. Gross break-even ROAS uses the VAT-inclusive price the customer pays instead of net revenue.
Should VAT be included in break-even ROAS?
Not for the profitability-correct figure: VAT is collected on behalf of the tax authority, so it is removed before revenue is measured. The gross figure exists only so you can compare like with like when your ad platform reports VAT-inclusive purchase value.
Is break-even ROAS the same as break-even CPA?
They describe the same point in different units. Break-even CPA is the contribution before advertising on one order — the most you can pay for that order. Break-even ROAS expresses the same ceiling as a revenue-to-spend ratio.
Does break-even ROAS cover fixed costs?
No. At break-even ROAS, contribution after advertising is exactly zero, so rent, salaries, software and other fixed costs are still unpaid. Company-level profit requires operating consistently above break-even.
Why does my ad platform show a ROAS above break-even while the store loses money?
Platform ROAS uses attributed revenue and that platform's spend only, and it may report VAT-inclusive purchase value. Refunds and discounts also reduce real revenue after the fact. Compare blended MER against your break-even, then confirm with contribution profit.

Your break-even ROAS changes when your economics change.

Connect Shopify to automatically track your actual profitability as your product mix, costs and AOV change.

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