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Return on ad spend: work out your break-even number before judging a campaign

Your ads dashboard says the campaign hit a ROAS of 2.5, meaning every unit of money spent brought back 2.5 in sales. That sounds good, but it can still be a losing campaign. It all depends on your margin.

Published · 2 min read

What ROAS is

ROAS = revenue attributed to the ads ÷ ad spend. Spend 200 and bring in 1,000 in revenue, and ROAS is 5, written 5x or 500%. Looked at the other way, ads took 20% of revenue.

Note the word “revenue”. ROAS measures sales, not profit. Out of that 1,000 you still pay for the products, shipping and fees before you know whether you made money.

Break-even ROAS: the number you need

Break-even ROAS = 1 ÷ your margin before ads. With a 50% margin you need a ROAS of at least 2 not to lose money. With 25% you need 4. There is no single “good” number for everyone, only the one that fits your margin.

Worked example

Revenue of 3,000 from 1,200 in spend, a ROAS of 2.5.

With a 35% margin: break-even is about 2.86, and the result is an estimated loss of 150.

With a 50% margin: break-even is 2, and the result is an estimated profit of 300.

The same campaign with the same numbers loses money for one seller and makes money for another. The only difference is the margin.

How to do it

  1. Open the ROAS calculator.
  2. Type the ad spend and the revenue attributed to the campaign.
  3. Type your margin before ads if you want the break-even number and estimated profit.
  4. You get the result with a clear verdict: above or below break-even.

Not sure of your margin? Work it out first with the Profit margin calculator, using the selling price and the product cost including shipping.

What the number does not tell you

  • “Attributed” revenue depends on how the platform assigns credit. Some of those sales would have happened without the ads.
  • The calculation does not include the value of a customer who comes back and buys again.
  • If spend is zero, ROAS is undefined, and the calculator says so instead of showing an infinite number.

To see where the budget leaks in detail, such as cost per click and conversion rate, use the Campaign performance calculator. And to find out how much you need to sell to cover all your monthly costs, the right tool is the Break-even calculator.

Common questions

What is a good ROAS?

One that clearly beats the break-even ROAS for your margin. We do not give general benchmarks because they mean nothing without your margin.

Is ROAS the same as ROI?

No. ROAS compares revenue with ad spend. ROI compares profit with cost.

Are my numbers saved?

No, the calculation runs in your browser.