How to calculate break-even ROAS
Work out the ROAS your Shopify ads need to stop losing money: find your real margin per order, divide one by it, and turn the answer into a cost-per-purchase limit.
What this is for
Return on ad spend (ROAS) is revenue divided by ad spend. On its own it says nothing about profit: a ROAS of 2 is healthy for a store that keeps most of each sale and a loss for one that keeps little. Break-even ROAS is the line between the two for your store, set by your own margin rather than anyone's average.
By the end of this guide you will have two numbers: the ROAS below which your ads lose money on the first order, and the most you can pay for a purchase. The first is how you read a report; the second is how you set stop rules for tests. The break-even ROAS glossary entry has the short definition.
Time needed and what you need
Time needed: about 30 minutes. Most of it goes on finding your real cost per order; the division itself takes seconds.
- Your average order value for the last 90 days, from Shopify's analytics
- The cost of goods for your main products, including packaging
- What you actually pay per order for shipping, after anything the customer pays
- Your payment provider's fee rate for your plan and country
- A calculator or spreadsheet
The steps
Use real figures from your own books. A guessed cost makes the answer look precise and be wrong.
1. Check what your ad platform counts as revenue
Your ROAS is only comparable to your break-even figure if both use the same revenue. Look at a few recent orders in Shopify and at the purchase value your ad platform recorded for them, and note whether it includes tax, shipping and discounts. Use the same definition in every step below.
2. Find your average order value
Take total sales divided by the number of orders over a recent, normal period; skip a month distorted by a big sale. If one product makes up most orders from ads, use that product's typical basket instead of the store-wide figure. The AOV entry covers the definition.
3. List every cost that comes with each order
Only count costs that rise with each extra order. Rent and salaries do not belong here; they are paid whether or not the ad works.
- Product cost, landed (including freight and duty to you)
- Packaging and inserts
- Shipping you pay, minus shipping the customer pays
- Payment processing fees on the order total
- An allowance for returns and refunds
- Average discount given per order, if not already taken off the order value
4. Work out the margin per order
Subtract the per-order costs from the average order value. That is what you keep from one order before advertising, in dollars. Divide it by the order value to get the margin as a decimal. A store that keeps $30 of a $100 order has a margin of 0.30. Some teams call this contribution margin; the name matters less than leaving nothing out.
5. Divide one by the margin
Break-even ROAS = 1 ÷ margin. With a margin of 0.30, that is 1 ÷ 0.30 = 3.33: each dollar of ads has to bring back $3.33 in sales just to cover the ad and the costs of the order. The same answer comes from order value ÷ dollars kept: $100 ÷ $30 = 3.33.
- Margin 0.50 gives break-even ROAS 2.0
- Margin 0.40 gives 2.5
- Margin 0.25 gives 4.0
- Margin 0.20 gives 5.0
6. Turn it into a break-even cost per purchase
The dollars you keep per order are also the most you can pay to win that order: break-even cost per purchase = average order value × margin. In the example above that is $30. This is the number to use as a stop rule when testing ads, because Ads Manager shows cost per purchase directly.
7. Convert it if you also advertise on Google
Meta reports ROAS as a multiple, while Google Ads writes it as a percentage, so a break-even of 3.33 is entered in Google as roughly 333. Google's help centre shows the conversion. source, checked 28 September 2026
8. Decide your target, then recalculate every quarter
Break-even is the floor, not the goal. If customers reorder, you may accept a first-order ROAS near break-even because repeat orders cost nothing to win; if they rarely come back, you need a target above it to make a profit. Recalculate whenever product costs, shipping rates or prices change. The free ROAS calculator is a quick way to rerun it.
A worked example
For a hot sauce store with a $48 average order
Worked example (an invented store with invented numbers)
Per order, the store pays $14.40 for product, $1.20 for packaging, $7.20 in shipping after what customers pay, $1.70 in payment fees and sets aside $0.50 for breakages and refunds. That is $25.00 of cost per order.
It keeps $48.00 − $25.00 = $23.00 per order, a margin of $23 ÷ $48 = 0.479, or 47.9%.
Break-even ROAS is 1 ÷ 0.479 = 2.09 (or $48 ÷ $23 = 2.09). Break-even cost per purchase is $23. An ad set reporting a ROAS of 1.8 is losing money on the first order; one at 2.6 is making $48 − $25 − ($48 ÷ 2.6) = $4.54 per order after its ad cost.
Common mistakes
Using the product's markup instead of the margin per order. A product bought for $10 and sold for $40 looks like it has plenty of room, until shipping, fees and returns take their share. Subtract every per-order cost first.
Mixing revenue definitions. If your ad platform counts revenue including tax and shipping but your margin was worked out on product revenue alone, the report will look better than the truth. Pick one definition and use it on both sides.
Comparing your ROAS with someone else's. Another store's number reflects their margin, their prices and their reporting. The only line that matters for your ads is your own break-even.
Treating break-even as success. At break-even the ads pay for themselves and nothing else. Set the target above it unless you have evidence that customers come back.
Doing this with Tilly
Tilly's ads agent writes ads and publishes them to Meta paused; Tilly never turns spend on, so budgets and targets stay in your hands. Tilly also prices on credits spent when an agent builds something, not on ad spend, so its cost does not grow when you scale a campaign that clears break-even.
Questions people ask
Should I use gross margin or net profit margin?
Use the margin after per-order costs only: product, packaging, shipping, payment fees and returns. Fixed costs such as rent and wages are covered by the profit above break-even, not by each order, so leaving them out gives a break-even figure you can act on for ads.
What if my products have very different margins?
Work out break-even ROAS per product or per collection, and use it for the campaigns that advertise those products. A single store-wide figure hides ads that sell your lowest-margin items.
Does Google Ads use ROAS the same way?
The idea is the same but it is written as a percentage, and Google's Target ROAS bidding tries to hit the number you enter. Convert your break-even multiple by multiplying by 100 before setting any target there. source, checked 28 September 2026
See this on your own store
Paste your store URL. The first pass takes about a minute and needs no account. Save a card (nothing is charged) and Tilly reads the whole store and works out who buys from you.