Break-even ROAS is a constraint, not a goal
Break-even ROAS is the ROAS you need so ad spend is covered by the profit available in the order (or the customer). It’s a constraint: if the channel can’t deliver around that number, scaling is not a media buying problem.
Teams get stuck when ROAS becomes something to “optimize” forever. ROAS is downstream of your offer, pricing, AOV, fees, shipping policy, and conversion rate. Media can improve efficiency at the margin, but it can’t fix unit economics.
First decide which break-even you mean
There are two common versions. Order break-even ROAS uses first-order profit only (contribution margin on that order). Customer break-even ROAS includes expected future profit from repeat purchases (LTV).
Order break-even is safer for cash flow. Customer break-even can be valid, but only if you have proven retention and enough cash runway to wait for payback.
The minimal inputs that actually move the number
Break-even ROAS moves with contribution margin percent. Contribution margin percent moves with product margin, payment/transaction fees, shipping subsidy, discounts, and returns/refunds.
If you ignore any of these, your “target ROAS” becomes a fantasy. Most “we’re profitable at 1.8 ROAS” claims break once you add shipping subsidy and returns.
A clean mental model (no spreadsheet required)
At a high level, break-even ROAS is revenue divided by ad spend when the ad spend equals the profit available in that revenue.
If your contribution margin is 35%, you have $35 of profit for every $100 of revenue. Spending $35 to get that $100 order is break-even. That implies a break-even ROAS of 2.86. Lower margin means higher required ROAS.
Why low AOV and fixed fees push ROAS targets up
Fixed processing fees are effectively a larger percent fee on small orders. Add percent processing and shipping subsidy and you can lose 10–20% of revenue before you even touch COGS.
If you sell low AOV, your ROAS target will usually be higher than you expect. The operational fixes are: raise AOV (bundles, multipacks, subscriptions), reduce shipping subsidy, or increase contribution margin.
Discounts and free shipping are the same thing in the math
Discounts reduce revenue. Free shipping increases your cost. Both reduce contribution margin and therefore increase break-even ROAS. If you run “10% off + free shipping,” you are hitting margin twice.
The practical fix is to choose one primary incentive. If you need both to convert, your economics may not support paid acquisition at scale without retention.
Returns/refunds: the ROAS killer most models ignore
Returns reduce realized contribution margin and can add extra costs (return shipping, restocking labor, write-offs). Even modest return rates can push break-even ROAS up more than teams expect.
If returns are meaningful in your category, treat them as an expected cost per order. Build the return rate into the model instead of “handling it later.”
How to use ROAS safely when scaling
Use ROAS as a guardrail, not a steering wheel. Set a minimum ROAS based on your break-even number plus a safety buffer for normal volatility.
Then watch contribution margin and payback. A campaign can have acceptable ROAS and still create cash flow pressure if payback is slow or if fulfillment costs rise as volume increases.
Use the Break-even ROAS Calculator to validate assumptions
The Shopify Break-even ROAS Calculator tool lets you model the levers that change your target and compare scenarios. Use it to test what happens if shipping costs rise, if discounts increase, or if return rates drift upward.
If a channel requires best-case assumptions to look viable, it’s a warning sign. The goal is a target that holds up under normal operational variance.