# Break-even ROAS: the formula, a worked example and why platform ROAS misleads.

How to calculate break-even ROAS from your margin, with a worked example, the Amazon ACOS version including UK VAT, and how to check a platform's reported ROAS before scaling spend.

By Odla · 31 Oct 2026

Break-even ROAS is the return on ad spend at which an ad-driven sale makes no profit and no loss. The formula is **break-even ROAS = 1 ÷ margin before ad spend**. With a 40% margin after product, shipping and fees, you need a ROAS of 2.5 to break even. Below that, every ad-driven order loses money.

That one number tells you whether a “4x ROAS” in an ad dashboard is good news or a slow leak. Here is how to calculate it, a worked example, the Amazon version, and how to check a platform’s figure before you scale spend.

## What is ROAS?

Return on ad spend is ad revenue divided by ad spend. [Amazon Ads](https://advertising.amazon.com/library/guides/acos-advertising-cost-of-sales) gives the formula as ROAS = ad revenue ÷ ad spend. Google uses the same idea in its [Target ROAS bidding](https://support.google.com/google-ads/answer/6268637?hl=en-GB): £5 of sales for every £1 of ad spend is a 500% (5x) ROAS.

The catch is in the first word of the formula: revenue. ROAS tells you how much was sold, not how much you kept.

## What is a good ROAS?

There is no universal number. A good ROAS is one comfortably above your own break-even ROAS, and that depends on your margins. A brand with 60% margins breaks even at 1.67, so it can profit at a ROAS of 3\. A brand with 25% margins breaks even at 4.0, so the same ROAS of 3 loses money on every ad-driven order. Work out your break-even first, then set a target above it.

## What is the break-even ROAS formula?

Two steps:

1. **Margin before ad spend** \= (revenue − variable costs) ÷ revenue
2. **Break-even ROAS** \= 1 ÷ margin before ad spend

[Shopify’s guide](https://www.shopify.com/blog/break-even-roas-calculator) sets it out the same way. Its example is a $100 product with $60 of variable costs, which gives a 40% margin and a break-even ROAS of 2.5.

Variable costs are the costs that come with each order:

- cost of goods sold
- shipping and packaging
- pick and pack or 3PL fees
- payment processing fees
- marketplace fees, where you sell on a marketplace
- a realistic allowance for returns and refunds

Shopify notes that fixed costs such as rent and salaries are usually left out of break-even ROAS. They still have to be paid, which is why your target should sit above break-even, not on it.

Use one basis throughout. If revenue excludes VAT, costs should too.

## What break-even ROAS do I need at my margin?

| Margin before ad spend | Break-even ROAS | Break-even ACOS |
| ---------------------- | --------------- | --------------- |
| 20%                    | 5.00            | 20%             |
| 25%                    | 4.00            | 25%             |
| 30%                    | 3.33            | 30%             |
| 35%                    | 2.86            | 35%             |
| 40%                    | 2.50            | 40%             |
| 50%                    | 2.00            | 50%             |
| 60%                    | 1.67            | 60%             |
| 70%                    | 1.43            | 70%             |

This is arithmetic, not a benchmark. Low-margin products need much higher ROAS to stay above water, which is why a single account-wide ROAS target can hide products that lose money.

## How do I calculate break-even ROAS? A worked example

_Illustrative numbers only. This is not client data._

A brand sells through its own store. Average order value is £60 after discounts, excluding VAT.

| Cost per order           | £         |
| ------------------------ | --------- |
| Product cost (COGS)      | 18.00     |
| Shipping and packaging   | 6.00      |
| Pick and pack            | 2.00      |
| Payment processing       | 1.50      |
| Returns allowance        | 2.50      |
| **Total variable costs** | **30.00** |

- Margin before ad spend = (£60 − £30) ÷ £60 = **50%**
- Break-even ROAS = 1 ÷ 0.50 = **2.0**

Every £1 of ad spend has to bring in at least £2 of revenue just to cover itself.

### What a discount does to break-even

Now run a 20% promotion. The order value falls to £48\. Keeping costs the same for simplicity:

- Margin = (£48 − £30) ÷ £48 = **37.5%**
- Break-even ROAS = 1 ÷ 0.375 = **2.67**

A campaign running at 2.3x was profitable before the sale; at the discounted price it loses money. Recalculate break-even before a promotional period, not after.

## Why does my ad platform show 4x when my margins say I’m barely breaking even?

There are three common reasons.

**1\. ROAS counts revenue, not profit.** A 4x ROAS on a 25% margin product is exactly break-even (see the table). The dashboard can look healthy while the business makes nothing.

**2\. More than one platform claims the same sale.** As [Shopify explains](https://www.shopify.com/blog/break-even-roas-calculator), if a customer clicks a Facebook ad and later buys through a Google search, both platforms may report that sale. Add up every platform’s attributed revenue and it can exceed what the store actually took.

**3\. Reporting lags and moves.** Google [advises excluding the most recent conversion delay period](https://support.google.com/google-ads/answer/6268637?hl=en-GB) when judging ROAS, because some conversions arrive days after the click. Yesterday’s ROAS will change.

Here is how the gap plays out. _Illustrative numbers, same 50% margin as above:_

| Scenario                                            | Ad spend | Revenue | Contribution after variable costs | Profit after ads |
| --------------------------------------------------- | -------- | ------- | --------------------------------- | ---------------- |
| Platform view: 4.0x ROAS                            | £1,000   | £4,000  | £2,000                            | £1,000           |
| Store view: 2.4x on orders the store can tie to ads | £1,000   | £2,400  | £1,200                            | £200             |
| Same 2.4x, but margin 30%                           | £1,000   | £2,400  | £720                              | −£280            |

The platform figure isn’t necessarily wrong. It answers a different question. The decision to scale spend should rest on the store’s numbers and your margin.

## How do I check ROAS before scaling spend?

1. **Work out break-even per product or category**, not just for the account. Margins vary, and so should targets.
2. **Use your store or Seller Central as the record of sales.** Shopify describes its own [marketing reports](https://www.shopify.com/blog/break-even-roas-calculator) as a single source of truth for this reason.
3. **Compare total revenue with total ad spend** across all channels for the same period. If every platform reports a strong ROAS but the total doesn’t move, some of the credit is shared.
4. **Recalculate for promotions**, using the discounted price.
5. **Set a target above break-even** that leaves room for fixed costs and profit. Google says to set Target ROAS [from your business goals, using historical ROAS as a reference](https://support.google.com/google-ads/answer/6268637?hl=en-GB).
6. **Give it data and time.** Google recommends reporting conversion values [for four weeks or one to two conversion cycles, whichever is longer](https://support.google.com/google-ads/answer/6268637?hl=en-GB), before setting a Target ROAS. It also says that after a target change the bidder reacts immediately but needs time to hit the new target, and suggests giving it one to two conversion cycles.

## Does break-even ROAS work for Amazon sellers?

Yes. Amazon reports ACOS more often than ROAS, but they are the same measure turned over. [Amazon Ads](https://advertising.amazon.com/library/guides/acos-advertising-cost-of-sales) defines ACOS as ad spend ÷ ad revenue × 100, and says that to stay profitable, ACOS needs to be lower than your profit margin. So **break-even ACOS = margin before ad spend**.

On Amazon, marketplace fees are a large part of variable costs. [Amazon UK](https://sell.amazon.co.uk/pricing) charges a referral fee on each item, which depends on the category, and says most referral fees are between 8% and 15%. FBA sellers also pay fulfilment and storage fees.

Amazon UK charges referral fees on the VAT-inclusive price. Amazon’s [pricing page](https://sell.amazon.co.uk/pricing) says the fee is a percentage of the total amount paid by the buyer, and its [European Business Solutions Agreement](https://sellercentral.amazon.co.uk/help/hub/reference/external/G201190440) defines the fee base to include “any taxes and customs duties”. For a VAT-registered seller, that means VAT has to come off the price before you work out the margin, while the referral fee is still taken on the full price.

_Illustrative numbers only, for a VAT-registered seller with costs shown excluding VAT. Check your own category’s fees in Seller Central._

| Per unit                                          | £         |
| ------------------------------------------------- | --------- |
| Selling price (including VAT)                     | 25.00     |
| VAT at 20% (included in the £25 price)            | 4.17      |
| **Revenue excluding VAT**                         | **20.83** |
| Referral fee (15% of the £25 VAT-inclusive price) | 3.75      |
| FBA fulfilment fee (illustrative)                 | 3.50      |
| Product cost                                      | 7.00      |
| Inbound shipping and storage allowance            | 1.00      |
| **Contribution before ad spend**                  | **5.58**  |

The arithmetic:

- VAT inside a 20% VAT-inclusive price = £25 ÷ 6 = £4.17, leaving £20.83
- Contribution = £20.83 − £3.75 − £3.50 − £7.00 − £1.00 = £5.58
- Margin before ad spend, excluding VAT = £5.58 ÷ £20.83 = **about 27%**
- Break-even ROAS = 1 ÷ 0.268 = **about 3.7**, so break-even ACOS is **about 27%**

If you measure ad sales including VAT, use the gross price as the base instead: £5.58 ÷ £25 = about 22%, so break-even ACOS is **about 22%** and break-even ROAS **about 4.5**. Check which basis your ad report uses and stick to it.

Leave VAT out and the same product appears to have a 39% margin and a break-even ACOS of 39%, which overstates the room for ad spend by more than ten percentage points.

A campaign at 30% ACOS on this product loses money on every ad-driven sale on either basis, whatever the sales chart says. It may still be a deliberate choice for a launch, or to win ranking, but it should be a choice with an end date.

## Where does Odla fit?

Odla’s [performance marketing](https://odla.com/services/performance-marketing/) team connects [paid search](https://odla.com/services/paid-search/), [paid social](https://odla.com/services/paid-social/), email and affiliate activity to the revenue and margin the business has agreed, and treats platform-reported conversions as a diagnostic, not the final measure. If your measurement setup can’t tell you which sales the ads actually drove, start with [analytics and optimisation](https://odla.com/services/analytics-optimisation/). For Amazon accounts, see [Amazon marketplace management](https://odla.com/services/marketplace-operations/).

New to the discipline? Read [what is performance marketing](https://odla.com/insights/what-is-performance-marketing/).

## Common questions.

### What is the break-even ROAS formula?

Break-even ROAS = 1 ÷ margin before ad spend. The margin is revenue minus all variable costs per order (product cost, shipping, packing, payment fees, returns), divided by revenue. A 40% margin gives a break-even ROAS of 2.5.

### What is a good ROAS for e-commerce?

There is no universal number. A good ROAS is one comfortably above your own break-even ROAS, which depends on your margins. A brand with 60% margins can profit at a ROAS that would lose money for a brand with 25% margins.

### Why does my ad platform show a higher ROAS than my profit suggests?

Ad platforms report revenue, not profit, and each platform credits the sales it can attribute to its own ads. When a customer touches more than one channel, more than one platform can claim the same sale. Check platform ROAS against orders in your store or Seller Central and against your margin.

### What is break-even ACOS on Amazon?

Amazon Ads defines ACOS as ad spend divided by ad revenue, the inverse of ROAS. Break-even ACOS equals your margin before ad spend: with a 30% margin, an ACOS above 30% loses money on those sales.

### Should fixed costs go into break-even ROAS?

Usually not. Break-even ROAS uses variable costs per order. Fixed costs such as rent and salaries are covered by the profit left after ads, so your target ROAS should sit above break-even to pay for them.