Find the exact return on ad spend an order has to produce before it makes you a cent. Enter your real numbers, including GST treatment, and the maths is done as you type.
You need $2.08 of ex-GST revenue for every $1.00 of ad spend before an order starts making money.
| ROAS | Revenue | Profit |
|---|
Break-even ROAS is the point where an order contributes exactly nothing. Every dollar of margin it produces has been spent acquiring it. One cent of ad spend above that figure and the order is costing you money; one cent below and it is making you money.
It is not a target. It is a floor. The number worth managing to is the target ROAS, which is the break-even figure plus whatever profit you actually want to keep. Most operators set a bid strategy target at break-even, wonder why the business is busy and broke at the end of the quarter, and never connect the two.
A ROAS of 4 is excellent for a business with a 20 percent contribution margin and a disaster for one with an 80 percent margin. Industry benchmarks are the most common reason an account gets scaled into losses. Your margin sets your floor, and nobody else's average applies to it.
The inverse is just as useful and easier to sanity-check in your head. If your contribution margin is 40 percent of revenue, your break-even ROAS is 1 ÷ 0.40 = 2.5. A 25 percent margin needs a ROAS of 4. A 50 percent margin needs a ROAS of 2.
Only costs that exist because the order happened. Those are variable costs, and they scale one for one with volume.
| Include | Leave out |
|---|---|
| Cost of goods, landed, including freight in and duty | Rent, warehousing leases and utilities |
| Outbound shipping you absorb, net of what the customer pays | Salaries and contractors on fixed hours |
| Packaging, pick and pack, per-order handling | Software subscriptions and platform fees |
| Payment processing and buy-now-pay-later fees | Agency or consulting retainers |
| Refunds, returns and unrecovered restocking | Creative production and photography |
| Marketplace or affiliate commission on the sale | Insurance, accounting and compliance |
Fixed costs are not ignored, they are simply covered by total contribution across all orders rather than by any single order. If you want a ROAS that carries overheads as well, set a target profit margin in the calculator and manage to the target ROAS instead.
If you are registered for GST, the 10 percent you collect is never yours. You hold it and remit it to the ATO. It should not appear anywhere in a profit calculation, which is why this calculator strips it out before doing any maths.
The problem is that many Australian ecommerce setups pass the GST-inclusive order total to Google Ads and Meta as the conversion value. The platforms then report a ROAS roughly 10 percent higher than the real one. Set a target of 4 against a GST-inclusive feed and you are really managing to 3.64.
Place a test order and compare the purchase value recorded in your tag with the ex-GST subtotal in your accounting system. If they differ by roughly 10 percent, the platform is reporting GST-inclusive revenue and every target you have set is out by that margin. GST treatment varies by business, so confirm your own position with your accountant rather than assuming.
The same issue applies in reverse to ad spend. Google Ads reports Australian costs excluding GST, and if you are registered, the GST on your invoice comes back as an input tax credit. Comparing a GST-inclusive revenue figure to a GST-exclusive cost figure is the most common source of a ROAS that looks healthy in the interface and does not show up in the bank account.
Even with GST handled correctly, the figure in your ad account will rarely match the figure in your accounts. The usual causes, in the order they are worth checking:
The fix is not a better attribution model. It is a monthly reconciliation between the ad platforms and your accounting system, and a blended figure you trust. Our conversion tracking guide works through the diagnosis in detail.
An Australian homewares retailer sells at an average order value of $150 including GST. Landed cost of goods is $52. Shipping and packaging average $14 per order after customer contribution. The payment gateway takes 1.75 percent. Roughly 3 percent of orders are returned.
To keep a 20 percent net margin, the retailer can spend $65.70 minus $27.27, or $38.43 per order, giving a target ROAS of 3.55. If their store is passing GST-inclusive values to Google Ads, the target they should type into the bid strategy is 3.90, not 3.55.
The distance between 2.08 and 3.90 is the entire argument for doing this calculation before touching a bid strategy. Figures here are illustrative and returns vary by industry.
Inflates the result by 10 percent before you start. Every downstream target inherits the error.
Loading rent and salaries into a per-order calculation produces a break-even ROAS you can never hit, and usually ends with paid media being switched off for being unprofitable when it was carrying the business.
In apparel, return rates above 20 percent are normal. At that level, a break-even ROAS of 2.5 is really 3.1, and the difference is the entire margin.
Buying first orders at a loss works when customers genuinely come back. Check the repeat rate and the repeat window in your own data before you count on it. Assumed LTV has sunk more ecommerce businesses than any single bad campaign.
Break-even is where profit is zero. Targeting it means running a business at zero contribution and paying overheads out of nothing. Set the target at the profit you want, not at the point of indifference.
Break-even ROAS is the return on ad spend at which an order contributes exactly zero profit. Every dollar of gross margin the order produces is consumed by the advertising cost of acquiring it. Above that number the order makes money, below it the order loses money. It is calculated as revenue divided by contribution margin, or one divided by your contribution margin percentage.
Take your average order value excluding GST, subtract the cost of goods, fulfilment and shipping, payment processing fees and any other variable cost that only occurs because the order happened. What remains is your contribution margin. Divide the ex-GST order value by that contribution margin and you have your break-even ROAS. A 40 percent contribution margin gives a break-even ROAS of 2.5.
It affects the number you see rather than the underlying economics. If you are registered for GST, the 10 percent you collect is remitted to the ATO and is not revenue, so profit should always be calculated on ex-GST figures. Many Australian ecommerce platforms nonetheless send GST-inclusive purchase values to Google Ads and Meta, which inflates reported ROAS by roughly 10 percent. Confirm what your own tracking sends before comparing a reported figure to a target, and confirm your GST position with your accountant.
No. Break-even ROAS is a contribution margin calculation, so it only includes costs that vary with each order. Rent, salaries, software and agency or consulting fees are fixed and are covered by total contribution across all orders, not by any single order. If you want a ROAS that also covers overheads, set a target profit margin instead and use the target ROAS figure.
Usually because reported revenue and real revenue are not the same thing. Common causes are GST-inclusive values being passed to the ad platform, refunds and returns not being deducted, discount codes applied after the conversion value fires, platform attribution claiming orders that would have happened anyway, and branded search being counted inside a prospecting campaign. Reconcile the platform against your accounting system before trusting either.
There is no universal figure, because it depends entirely on your margin. A business with an 80 percent contribution margin is profitable at a ROAS of 1.25, while a business with a 20 percent margin is losing money at a ROAS of 4. Benchmarks copied from other companies are the single most common reason an account is scaled into unprofitability. Your break-even ROAS is the only benchmark that applies to your business.
They are the same calculation expressed two ways. ROAS is revenue divided by ad spend, ACOS is ad spend divided by revenue. A break-even ROAS of 4 is a break-even ACOS of 25 percent. ROAS is the common language in Google Ads and Meta, ACOS is more common in marketplaces such as Amazon.
Only if you have measured repeat purchase behaviour and know that customers come back. Businesses with strong repeat rates can deliberately buy first orders at or below break-even because the second and third orders carry no acquisition cost. Businesses with one-off purchases cannot. Never assume lifetime value you have not verified in your own data.
This calculator is an educational estimating tool. It is not advice. The results are illustrative only and must not be relied upon as financial, accounting, taxation, investment, legal or professional advice of any kind. Nothing on this page takes into account your objectives, financial situation or particular needs.
The output is only as good as the inputs. Every figure returned is calculated solely from the numbers you enter. If those numbers are estimated, out of date, incomplete or incorrect, the result will be too. Paid Media Plus does not verify, and cannot verify, any figure you enter.
The model is deliberately simplified. Among other things, it does not account for:
Results are not a forecast, projection, guarantee or prediction of performance. No outcome is promised or implied. Advertising results vary by industry, offer, market conditions, competition and execution, and figures shown anywhere on this site are illustrative of well-optimised accounts rather than typical or expected results.
Verify independently. Before making any business, budgeting, bidding or investment decision, reconcile these figures against your own accounting records and obtain advice from a qualified accountant, tax agent or licensed financial adviser who understands your circumstances. If a figure produced here disagrees with your accounts, your accounts are right.
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A break-even ROAS is only useful if the data feeding your account is trustworthy. These are the three things worth checking next.
How to tell whether the revenue in your ad account is real, and what to do when it is not.
Find the three biggest problems in a Google Ads account, in dependency order.
Senior-level management built around margin rather than reported ROAS. No lock-in contracts.
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