Break-even ROAS calculator
Break-even ROAS is the ROAS at which the margin on your orders exactly pays for the ads: below it ads lose money, above it they earn. It's measured against the ROAS Ads Manager reports, which counts every order, including the ones that come back.
- Break-even ROAS
- 2.55x
- Margin per order, after returns
- ₹392
The formula
- Margin on a delivered order = order value × (1 − product cost − payment fees) − shipping
- Margin per order, after returns = delivered share × margin on a delivered order − RTO rate × (shipping + return shipping)
- Break-even ROAS = order value ÷ margin per order, after returns
Rates are shares between 0 and 1: 30% is 0.3. Returned products are assumed to go back into stock.
Worked example
Orders average ₹1,000. Product cost is 40% of that and payment fees 2%.
Shipping costs ₹60 each way, and 20% of orders come back.
A delivered order leaves ₹520 (₹1,000 − ₹400 − ₹20 − ₹60). After returns, the average order leaves ₹392, so the ads break even at a ROAS of 2.55x.
Questions
What does break-even ROAS mean?
It's the ROAS where ads neither make nor lose money: each rupee of ads brings back exactly enough margin to pay for itself. Aim above it to leave room for profit and the costs this doesn't cover, such as salaries and software.
Why does RTO raise break-even ROAS?
Ads Manager counts every order, including COD orders that come back. A returned order earns nothing and costs shipping both ways, so leaving RTO out makes break-even look lower than it really is.
Should I enter order value with or without GST?
Use order value after GST is taken out, because the tax isn't yours to keep. Counting it makes every ROAS look better than it is. Keep product cost, fees and ad spend on the same basis.
What does a dash mean?
A dash means the average order loses money before any ad spend, so no ROAS can break even. Lower costs, raise prices or cut returns first.