Break-even ROAS is where ad spend exactly equals gross profit. Below it you are buying customers at a loss. Above it you are making money, before fixed costs. It is set by your margin, not by your industry, and not by what an agency read on a forum.
The calculation
If your gross margin is 30%, every €1 of revenue leaves €0.30 to pay for the ad — so you need roughly 3.3x to break even. At 50% margin, 2x. At 20%, 5x.
The quick version: break-even ROAS = 1 ÷ gross margin. Gross margin means after cost of goods, shipping, fulfilment and payment fees — not just after what you paid the supplier.
The break-even calculator includes returns and gives you the max CPA as well, which is often the more useful number day to day.
Returns move it more than anyone expects
ROAS in the Google interface is reported on revenue, before returns. A fashion store with a 30% return rate is not earning what the screen says. Worse, you paid the ad cost on the returned order too.
Put a 30% return rate into a product with a comfortable 2.5x break-even and you can find yourself needing well over 3.5x — a target that changes which campaigns are viable and which products should be paused entirely.
Max CPA is easier to work with
ROAS gets awkward when order values swing. If you know one order leaves €22 of gross profit, then €22 is what a customer may cost before you stop making money. That translates directly into a bidding target, and it is much harder to fool yourself with.
What if your break-even is above 4x?
Then paid traffic is going to be hard, and that is not a bidding problem. It is a pricing, cost or product problem. The options, in rough order of how often they work:
- Raise AOV. Bundles, volume discounts, post-purchase upsells. A 20% AOV lift does the same work as a 20% CPA cut, and it is usually easier.
- Reduce landed cost — supplier terms, shipping method, packaging.
- Raise price. Frequently the least-tried option and the most effective one.
- Change product. Some products simply cannot carry paid traffic. Better to know in week one.
No agency can fix arithmetic with a target. If the maths does not work, we will tell you before you pay us anything.