ROAS calculator, with your break-even ROAS

How to calculate ROAS

ROAS (return on ad spend) is the revenue your ads bring in, divided by what you spent on them.

A ROAS of 2.5 means $2.50 in sales for every $1 of ads. Some tools write it as a percentage: Google Ads gives the example of $5 in sales for $1 of ad spend, which it sets as a 500% target ROAS (Google Ads Help).

The revenue here is what your ad account credits to your ads. It is not your profit, and it is not your whole store’s revenue.

Break-even ROAS: the number that matters

ROAS alone can’t tell you if your ads make money. The same ROAS is a profit on one product and a loss on another. What decides it is how much each order leaves once the product, shipping and fees are paid: your margin before ads.

Without VAT, that is the same as 1 ÷ your margin before ads. If your prices include VAT, the price on top is the one your ad account sees: with or without VAT, as you choose in the calculator. At the break-even ROAS, ads pay for themselves and nothing more. Above it, each sale from ads leaves money. Below it, each sale costs you.

Target ROAS for the profit you want

Breaking even is not the goal. Enter the share of revenue you want to keep in “Profit goal”, and the calculator gives the ROAS to aim for:

If your goal is bigger than your margin before ads, no ROAS can reach it, and the calculator says so.

Worked example

Made-up numbers: the ones pre-filled in the calculator above.

With $5,000 in revenue for $2,000 of ad spend, the ROAS is 2.5: above the 2.05 break-even. Each $100 of ads leaves about $21.88 after product, shipping and fees (2.5 × 19.50 ÷ 40 − 1 = 0.219).

When ROAS lies

• Returns. ROAS counts sales, not the sales you keep. Each refund comes out of your margin, so a product that comes back often needs a higher ROAS. On Shopify, card fees aren’t returned to you when you refund an order (Shopify Help Center).
• Payment fees. A percentage of each order plus a fixed amount. On a cheap product, the fixed part eats a bigger share of the margin.
• Product cost. The same ROAS of 3 is a profit at a 50% margin (break-even ROAS 2) and a loss at a 25% margin (break-even ROAS 4).
• VAT. If your prices include VAT and your ad account receives tax-included amounts, part of that revenue belongs to the tax office. Enter your VAT rate and the revenue basis in the calculator.
• Attribution. Ad platforms credit a sale to an ad inside an attribution window. Two tools can show two different ROAS for the same week. Compare with the orders in your Shopify admin over the same dates.

Questions

What is a good ROAS?

One above your break-even ROAS, with room for the profit you want. A “good ROAS” quoted without your margin means little: at a 70% margin you break even at a ROAS of 1.43, at a 30% margin you need 3.33.

Is ROAS the same as ROI?

No. ROAS divides revenue by ad spend. ROI divides profit by what you spent. A campaign can show a ROAS above 1 and still lose money once the product, shipping and fees are paid.

Where do I find my Shopify payment fees?

In your Shopify admin: Settings › Payments, then Manage in the Shopify Payments section. Your rates are under “Standard rates”, and they depend on your plan (Shopify Help Center).

Should I enter the price with or without VAT?

Enter the price the customer pays and the VAT rate it includes. VAT is never yours, so the calculator always takes it out of your margin. Then tell it which revenue your ad account sees, with or without VAT: that only changes the ROAS it compares against.

Does this include my monthly costs?

No. Break-even ROAS only uses costs that grow with each order. Your subscription, tools and salary need a profit on top: that is what the profit goal is for. For returns, discounts and apps per order, use the Shopify profit margin calculator.