The short answer
Break-even ROAS = 1 ÷ gross margin. If an $80 order costs $38.40 in product, shipping and fees, you keep $41.60: a 52% margin, so your break-even ROAS is about 1.9x. Below that, every sale from ads loses money. To keep 10% of revenue as profit, you'd target around 2.4x.
What counts as a cost
Include every cost that rises with each order: the product itself, packaging, shipping and fulfilment, payment processing, marketplace or platform fees. Leave out fixed overheads like rent and salaries; those are covered by the profit above break-even.
If you offer free shipping or frequent discounts, include those too. They're the most common reason stores think they're profitable on ads when they aren't.
Worked examples
| Store | Gross margin | Break-even ROAS | Target for 10% profit |
|---|---|---|---|
| Fashion, discounted | 35% | 2.9x | 4.0x |
| Home goods | 45% | 2.2x | 2.9x |
| Supplements (own brand) | 65% | 1.5x | 1.8x |
| Electronics reseller | 18% | 5.6x | 12.5x |
Thin-margin products need very high ROAS to be worth advertising at all. Often the fix is to advertise them less and push higher-margin lines harder.
When it's fine to run below break-even
If customers reliably come back, a first order at a small loss can be a good investment. Subscription products, consumables and brands with strong retention often do this deliberately. Just make sure you know your repeat purchase rate and how long it takes to earn the money back.