Break-even ROAS calculator

How it is worked out

• Contribution margin = price minus product cost, shipping, payment fees and the share of orders you refund.
• Break-even CPA = that margin. Pay more than this for an order and you lose money on it.
• Break-even ROAS = price divided by the margin.
• Target ROAS = price divided by (margin minus the profit you want to keep).

Example: a $40 desk organizer

• Costs per order: $15.50 product, $5.00 shipping and packaging, $1.50 payment fees, $2.00 refunds.
• Margin: $16.00, or 40% of the price.
• Break-even CPA is $16.00, and break-even ROAS is 2.50.
• At a $18.00 cost per order, every first order loses $2.00.

Questions

Is a 2.0 ROAS good?

• It depends on your margin. A 2.0 ROAS makes money only if your break-even ROAS is below 2.0.
• A 50% margin breaks even at 2.0. A 30% margin needs 3.33 just to break even.

Should I use the ROAS my ad platform reports?

• Check it against your store's own sales divided by ad spend.
• Ad platforms miss some buyers and count others twice.

What about repeat orders?

• Repeat buyers raise what a new customer is worth, so you can pay more for the first order.
• Only count repeats you have actually seen in your own data.