Break-even ROAS vs target ROAS: what should ecommerce stores track?
Break-even ROAS tells you the minimum ad efficiency needed to avoid losing money. Target ROAS tells you the ad efficiency needed after adding your desired profit margin.
The short version
Break-even ROAS is your safety line. If campaigns fall below it, the order may lose money after product cost, shipping, fees, refunds, packaging, and discounts. Target ROAS is stricter because it keeps room for the net margin you want.
Break-even ROAS
Use this as the floor. It answers: how much revenue must each ad dollar bring back before the product stops losing money?
Target ROAS
Use this as the goal. It answers: what ROAS do we need after reserving the margin we want to keep?
Why platform ROAS is not enough
Ad platforms usually know revenue and ad spend. They do not know your exact COGS, shipping, payment fees, packaging cost, or refund impact. A campaign can show positive ROAS while the product still has weak contribution margin.
When to use each number
- Use break-even ROAS when deciding if a campaign is safe to keep running.
- Use target ROAS when deciding if the product is ready to scale.
- Review CPA too because CPA is often easier to control inside ad accounts.
Calculate it with your own costs
Use the calculator to include discounts, COGS, shipping, packaging, fees, refund rate, current ad performance, and target net margin.
FAQ
Is target ROAS the same as break-even ROAS?
No. Break-even ROAS is the minimum ROAS needed to avoid losing money before fixed overhead. Target ROAS includes a desired profit margin or buffer.
Which ROAS should I use to scale ads?
Use break-even ROAS as the safety floor and target ROAS as the scaling goal. Review contribution margin and refund assumptions before increasing spend.