Find the ad return you need to break even
Enter your order value, product cost, shipping, fees and return rate. See the lowest return on ad spend that still pays for each order, with the math shown step by step.
Free, 30 minutes, and you'll leave with at least one clear next step.
Example result
What your ads have to bring back
- Break-even ROAS
- Reported sales per $1 of ad spend
- Break-even cost per order (CPA)
- The most you can pay in ads for one order
- Contribution margin per order after returns
- What one order leaves you before ad spend
Break-even ROAS is 2.53. Each order leaves $31.60 before ads, so that is the most you can spend in ads per order.
How the math works
- Kept sales per order = AOV × (1 − return rate)
- Contribution margin per order = kept sales × (1 − product cost %) − shipping and fulfillment − (AOV × fees %)
- Break-even CPA = contribution margin per order
- Break-even ROAS = AOV ÷ break-even CPA
Returned products go back into stock, so product cost only counts on kept sales. Shipping, fulfillment and payment fees count on every order, because you rarely get them back. ROAS uses AOV before returns, since that is the number the ad platforms report.
Worked example
Example numbers only. Average order value: $80.00; Product cost: 35%; Shipping and fulfillment per order: $12.00; Payment and app fees: 4%; Return rate: 10%.
- Kept sales per order: $80.00 × (1 − 10%) = $72.00
- Contribution margin: $72.00 × (1 − 35%) − $12.00 − ($80.00 × 4%) = $46.80 − $12.00 − $3.20 = $31.60
- Break-even CPA: $31.60 per order
- Break-even ROAS: $80.00 ÷ $31.60 = 2.53
What does breaking even on ads mean?
Break-even ROAS is the return on ad spend where an order pays for its own ad cost and nothing more. Above it, each order adds profit. Below it, every sale costs you money, even when the ad platform shows a number that looks good.
The calculator works it out from five numbers you already have in Shopify and your accounting software: average order value, product cost, shipping and fulfillment, payment and app fees, and your return rate. You get three answers. The break-even ROAS, the break-even cost per order (often called CPA), and the contribution margin each order leaves after returns.
How is the number worked out?
Start with what you keep from an average order. Take the order value and remove the share that comes back as refunds. From those kept sales, subtract the product cost. Then subtract shipping and fulfillment, plus payment and app fees on the full order. What is left is the contribution margin per order.
That margin is the most you can spend on ads to get one order and still break even, so it is also your break-even cost per order. To turn it into ROAS, divide the order value by the contribution margin. We use the order value before returns because Meta and Google report sales before returns. For example, if your break-even ROAS is 2.5 and a campaign shows 2.2, that campaign loses money on every order it brings in.
The formula and a worked example with example numbers sit right under the calculator, so you can check every step by hand.
Why do returns change the answer so much?
Returns are the cost people leave out most. A returned order still cost you the ad click, the shipping out, often the shipping back, and the card fee. The ad platform still counts the sale. So a store with a high return rate needs a higher ROAS than its margins suggest. Try the calculator with the return rate set to zero, then with your own rate, and compare the two answers. Our guide on measuring ad results with returns shows how to bring refunds into your reports.
The calculator assumes returned products go back into stock. If most returns can't be resold, like opened skincare or worn clothing, raise the product cost to cover the loss. Fashion and beauty brands run into this more than most.
Which mistakes throw the result off?
These are the errors we check for first when an owner shares their numbers with us.
- Using gross margin from your accounting software. It often leaves out shipping, fulfillment and fees, so the break-even point comes out too low.
- Forgetting app fees. Subscription, review and upsell apps that take a share of sales add up.
- Using one number for the whole store. A $40 order and a $200 order have very different break-even points, so run the calculator for your main products too.
- Treating break-even as the goal. Break-even means the ad paid for itself and nothing else. Rent, payroll and software still need covering, so set your target above it.
- Judging new and repeat buyers the same way. A first order can run below break-even if those customers come back. Our max CAC calculator shows how much room repeat orders give you.
How should you use the result?
Use break-even ROAS as the floor for every campaign. Hold results up against it each week, and set your ROAS targets in Google and Meta above it. Check it again whenever shipping rates, product costs or your return rate change, because each one moves the floor.
Then compare it with what you actually see. If campaigns sit well above break-even, you may have room to spend more. If they sit near or below it, look at order value, shipping costs and returns before you touch the ads. Our guide to Performance Max for Shopify covers how to set those targets inside Google Ads.
When should you talk to someone?
Talk to someone when the calculator says you should be profitable but the bank account says otherwise, or when the ad platforms and Shopify disagree on how many sales you made. Those gaps usually point to tracking problems or costs that aren't in the math.
Our paid ads team judges campaigns on profit after shipping and returns, and our ad tracking and reporting work ties ad spend to the orders in your store. See how that worked for Veiled Collection, or book a 30-minute call and bring your numbers.
Break-even ROAS calculator questions
Is break-even ROAS the same as target ROAS?
They are two different numbers. Break-even ROAS is the point where an order covers its own ad cost. Target ROAS is the goal you set in Google or Meta, and it should sit above break-even so the ads also cover overhead and leave a profit.
Should I compare break-even ROAS with Meta's numbers or Shopify's?
Use both. The calculator gives you the floor in the same terms the ad platforms use, which is sales before returns. Compare it with the ROAS each campaign reports. Once a month, also divide total Shopify sales by total ad spend to check that the platforms aren't taking credit for the same orders. Our ad tracking work sets this up.
Does this calculator work for subscription products?
It works for the first order. With subscriptions, the first order often runs below break-even because later renewals pay it back. Use the max CAC calculator to see how much those repeat orders change what you can spend.
What if my break-even ROAS comes out very high?
A high number means each order leaves a thin margin, and better ads alone rarely fix that. Raise order value with bundles or a free-shipping threshold, renegotiate shipping rates, or bring returns down.
Should average order value include discounts?
Yes. Use the average order value after discounts, since that is what customers actually paid. If you run big sales, run the calculator a second time with your sale-period order value, because the floor rises when prices drop.
Related
More free tools
Want a second look at your break-even point?
Bring your numbers to a 30-minute call. We'll check them against your ad accounts and show you where margin is slipping.