The short answer
Break-even ROAS is your order value divided by your profit per order before ads. With a 40% profit margin before ads, break-even ROAS is 1 ÷ 0.40 = 2.5, which Google Ads writes as 250%. Below that, each sale costs more in ads than it makes.
The formula
- Profit before ads = order value − cost of goods − shipping and fulfillment − payment and platform fees.
- Break-even ROAS = order value ÷ profit before ads.
- Break-even cost per sale = profit before ads. That is the most you can spend on ads for one sale without losing money.
- Google Ads shows ROAS as conversion value divided by cost (2.5), and asks for a Target ROAS as a percentage (250%).
A worked example
An order of $60 with $18 cost of goods (30%), $6 shipping and fulfillment, and 3% payment fees ($1.80) leaves $34.20 profit before ads.
Break-even ROAS is $60 ÷ $34.20 = 1.75, or 175%. You can spend up to $34.20 in ads per sale and still break even.
To keep $9 profit per order after ads (15% of the order), the ad budget per sale is $34.20 − $9 = $25.20, so the ROAS you need is $60 ÷ $25.20 = 2.38, or 238%.
| Profit margin before ads | Break-even ROAS | As a Google Ads Target ROAS |
|---|---|---|
| 60% | 1.67 | 167% |
| 50% | 2.00 | 200% |
| 40% | 2.50 | 250% |
| 30% | 3.33 | 333% |
| 25% | 4.00 | 400% |
| 20% | 5.00 | 500% |
Make sure the numbers match what Google counts
ROAS in Google Ads uses the conversion value your tracking sends. Check whether that value includes tax and shipping, and use the same definition of order value in your sum. If it includes shipping, count shipping as revenue and its cost as a cost.
Returns and refunds lower your real profit, so build your usual return rate into the cost of goods. If customers often buy again, you may accept a first order at or near break-even.
From break-even to a Target ROAS
Your Target ROAS should sit above break-even by the profit you want. Google warns that a target set too high can limit how much traffic a campaign gets, and suggests starting from what the campaign has achieved recently, such as its conversion value per cost over the last four weeks.
If that recent figure is well above break-even, you have room to lower the target and grow. If it's below, fix the products and search terms that lose money before raising the target.
Products have different break-evens
A store-wide break-even hides products with thin margins. Group products by margin with Google Merchant Center custom labels, so each group can have its own campaign or target.
How UltraROAS.ai does this for you
UltraROAS.ai judges every product against its own break-even, using your cost of goods (30% until you set your own), and moves budget toward the products and campaigns that clear it.