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What ROAS do you need before ads make money?
Enter your price, costs, fees and returns. See what each order leaves, the most you can spend to win one, and your break-even ROAS.
THE SHORT ANSWER
Break-even ROAS is the order value divided by what one order leaves after tax, goods, shipping, fees and returns. Below it, every ad-driven order loses money.
Calculate it for your store
IN SHORT
- Break-even ROAS is the order value divided by what one order leaves after costs. Below it, every ad-driven order loses money; above it, ads make a profit.
- In the worked example, a 100 order leaves 55.00 after tax, goods, shipping, fees and returns, so break-even ROAS is 1.82. Those figures are illustrative, not a benchmark.
- Tax changes the answer: the same 100 sticker with 20% tax inside it leaves 39.17 and needs a ROAS of 2.55, against 1.82 with tax added at checkout.
- Gross margin alone overstates what you can spend on ads, because it ignores shipping, payment fees and returns.
- The calculator uses only the numbers you enter and has no margin benchmark. Nothing you type is sent anywhere or stored.
A worked example
Illustrative figures, not a benchmark and not a Lucent client. Computed with the same maths as the calculator.
- Selling price (tax added at checkout)
- 100.00
- Cost of goods
- 30.00
- Shipping you pay
- 8.00
- Payment fee
- 2.9% + 0.30
- Orders refunded
- 5%, at 6.00 each
- Left per order
- 55.00
- Break-even cost per order
- 55.00
- Break-even ROAS
- 1.82
Why the market changes the answer
The same sticker price, with and without tax inside it. Illustrative figures.
| Tax added at checkout (US) | Tax inside the price (UK, Australia) | |
|---|---|---|
| Selling price | 100.00 | 100.00 |
| Net revenue | 100.00 | 83.33 |
| Left per order | 55.00 | 39.17 |
| Break-even ROAS | 1.82 | 2.55 |
The terms, defined
ROAS
Return on ad spend: the order value an ad platform reports divided by what you spent on the ads. A ROAS of 3 means 3 in orders for every 1 spent.
Break-even ROAS
The lowest ROAS at which an order does not lose money. It is the price divided by what the order leaves before ad spend.
Contribution margin
What an order leaves after the costs that come with it: goods, shipping, payment fees and returns. Ad spend, staff and software come out of this.
How it is worked out
Four steps, all of them arithmetic you can check by hand.
- 01
Take the tax out
If your price includes tax, as in the UK and Australia, divide it by one plus the tax rate. Tax is not your revenue.
- 02
Remove refunds and goods
Take off the share of orders refunded, then the cost of goods on the orders that stay sold.
- 03
Take off shipping, fees and returns
Subtract what you pay to ship, the payment fee on the full price, and the cost of handling each return.
- 04
Divide the price by what is left
What is left is the most you can spend to win one order. The price divided by it is your break-even ROAS.
Questions about the calculator
How do you calculate break-even ROAS?
Work out what one order leaves after tax, refunds, cost of goods, shipping, payment fees and return handling, then divide the order value by it. In the worked example an order of 100 leaves 55.00, so break-even ROAS is 100 divided by 55.00, which is 1.82.
What is a good ROAS for a Shopify store?
There is no honest universal number, because it depends on what your orders leave after costs. A ROAS is good when it is above your own break-even by enough to pay for everything the ads do not cover, such as staff and software. The calculator gives you the floor to measure against.
What is the difference between ROAS and break-even ROAS?
ROAS is what your ads actually return per unit spent. Break-even ROAS is the lowest ROAS at which you do not lose money on the order. If your ROAS is under your break-even, the ads cost more than the orders leave.
Why is break-even ROAS higher than I expected?
Usually because margin is smaller than it looks once shipping, payment fees, returns and tax are taken out. In the worked example, cost of goods is only part of what comes off the price.
Do I enter my price with or without tax?
Enter the price the customer pays, then put the tax rate that is inside it in the tax field. In the US, where tax is added at checkout, enter 0. In the UK and Australia, prices normally include VAT or GST, so enter your rate. The calculator removes it before working out what you keep.
Does the calculator include the cost of the ads for repeat orders?
No. It looks at one order. If customers buy again, a lifetime view can justify a ROAS below break-even on the first order, but that is a decision about repeat rate that this tool does not model.
Is the result a forecast?
No. It is arithmetic on your numbers. It shows the line your ads have to clear, not whether they will.
Does Lucent Commerce store the numbers I enter?
No. The calculation runs in your browser. Nothing you type is sent to a server or saved.
Where this fits
The calculator gives you the line your ads have to clear. These are the places we work on moving it.
Shopify conversion rate optimization
More orders from the same traffic, so the same ad spend goes further.
Discount break-even calculator
How many more orders a discount needs to pay.
Black Friday and holiday playbook
Set the offer from your margin before the sale.
Free store audit
A prioritized list of fixes, some of which you can do yourself.