How it works
Every order earns its value, minus what it costs to make, ship and process, minus what comes back as returns. What's left is the most you can spend on ads to win that order and still break even.
Break-even ROAS is order value divided by that margin. If an order of 400 leaves 160 after costs, you can spend up to 160 in ads per order, so you need at least 400 ÷ 160 = 2.5× ROAS just to stand still.
The formula
Margin per order = (order value × (1 − returns %) × (1 − product cost %)) − shipping − (order value × fees %)
Break-even ROAS = order value ÷ margin per order. Target ROAS = order value ÷ (margin per order − target profit % × order value).
Limits
- It treats every order the same. If your basket sizes vary a lot, run it per product line.
- It ignores repeat purchases. A customer worth three orders can justify a lower first-order ROAS; that's what the CAC and payback calculator is for.
- Platform ROAS includes sales that would have happened anyway. Your real, incremental ROAS is lower than the dashboard says.