Break-Even ROAS vs Target ROAS

ROAS can look “good” and still be unprofitable if your gross margin is too low.

Break-even ROAS

Break-even ROAS is the minimum ROAS where your gross profit covers ad spend.

Break-even ROAS = 1 ÷ Gross Margin

Example:

• Gross margin = 35% (0.35)
• Break-even ROAS = 1 ÷ 0.35 = 2.86x

Target ROAS

Target ROAS includes your profit goal.

Target ROAS = 1 ÷ (Gross Margin - Target Profit %)

Example:

• Gross margin = 35% (0.35)
• Target profit = 20% (0.20)
• Target ROAS = 1 ÷ (0.35 - 0.20) = 6.67x

What to do if your target ROAS is unrealistic

• Increase prices (even small changes can help)
• Reduce COGS/shipping
• Improve conversion rate
• Raise AOV with bundles/upsells