Break-even ROAS calculator

A 400% ROAS target copied from a blog can lose money on every order. Break-even ROAS is 1 divided by contribution margin, and this skill builds that margin honestly.

When to use

• Before setting tROAS on Shopping or PMax.
• When a category's margin, fees or return rate changes.

Input

Average order value (and whether it includes VAT and shipping), COGS per order, payment fees, shipping and pick/pack cost, shipping charged to customer, return rate, cost per return, share of returned COGS that can be resold. Ideally per category.

Method

1. Match the basis. ROAS = conversion value ÷ ad cost. Use revenue on the same basis as the conversion value sent to Google Ads (usually ex VAT, before returns). A mismatch here moves the answer more than anything else.
2. Contribution per order = revenue after returns − COGS net of resold returns − payment fees − fulfilment − return handling.
3. Contribution margin = contribution ÷ the revenue basis from step 1.
4. Break-even ROAS = 1 ÷ contribution margin.
5. Target ROAS for a profit share p of revenue = 1 ÷ (margin − p).

Worked example

AOV 80.00 ex VAT; COGS 32.00; fees 2.9% + 0.30 = 2.62; shipping + packing 8.50; returns 12%, 75% of returned stock resold, return shipping 6.00.

• Revenue after returns: 80 × 0.88 = 70.40
• COGS net: 32 − (0.12 × 32 × 0.75) = 29.12
• Return shipping: 0.12 × 6 = 0.72
• Contribution: 70.40 − 29.12 − 2.62 − 8.50 − 0.72 = 29.44
• Margin: 29.44 ÷ 80 = 36.8% → break-even ROAS 2.72 (272%)
• Keeping 10% profit: 1 ÷ (0.368 − 0.10) = 3.73 (373%)

Rules

• Every input comes from the store. If one is missing, stop at that line and ask; do not plug in an "industry average".
• Show the arithmetic, not only the result.
• If margin ≤ p, say that no ROAS target reaches the goal at this cost structure.
• The output is advice; the agent does not change bid targets.

Output format

| category | margin | break-even ROAS | tROAS (10% profit) |
| Footwear | 36.8% | 2.72 | 3.73 |
| Socks | 52.1% | 1.92 | 2.37 |
Basis: ex VAT, before returns (matches Ads conversion value).

License

MIT