What break-even ROAS and ACOS mean
Break-even ROAS is the lowest return on ad spend where an order still makes zero profit once every cost, including advertising, is paid. Break-even ACOS is the same limit shown as a percentage. Below the break-even ROAS, or above the break-even ACOS, each ad-driven order loses money.
Worked example
A $40 product costs $12. Fees are 15% plus a $5.20 fixed fee, packaging is $0.80, and 5% of orders are returned. Refunds cost $2.00, fees $11.20 and product cost lost $11.40, which leaves $14.60 of profit before ads. That makes the break-even ACOS 36.5% and the break-even ROAS 2.74x. To keep a 20% profit margin after ads, you need an ACOS of 16.5% or lower, which is a ROAS of about 6.06x.
If your clicks cost $1.20 and 10% of them order, each order costs $12 in ads. That is a 30% ACOS and a $2.60 profit per order, so the ads are profitable but not by much. The highest cost per click you could pay at that conversion rate is $1.46.
Why a general ROAS target is risky
Rules such as "aim for 4x" ignore your margin, fees and returns. Two products with the same price can have very different break-even points. Work out the number for each product, and check it again when your costs or fees change. For the full picture of profit per order, use the net profit calculator.
Frequently asked questions
How do I calculate break-even ROAS?
Divide your selling price by the profit you make on an order before ad spend. With $40 price and $14.60 profit before ads, break-even ROAS is 2.74.
What is break-even ACOS?
It is the highest ACOS at which you still make no loss. Calculate it as profit before ads divided by the selling price, so $14.60 on a $40 sale gives 36.5%.
What is the difference between break-even and target ROAS?
Break-even ROAS gives zero profit. Target ROAS is higher and leaves the profit margin you want after ads. Enter a target margin to see both.
Do returns and fees change my break-even ROAS?
Yes. They reduce the profit you have available to spend on ads, which raises the ROAS you need. That is why the calculator includes them.