Break Even ROAS Calculator And How To Calculate It Easily

Jan 8, 2024

ROAS calculator free download

Unlocking the potential of successful online ads lies in the power of Return on Ad Spend (ROAS). This essential metric is your digital marketing GPS, navigating the twists and turns of the online ads landscape.

Maintaining the balance between higher ROAS & ROAS lower

For anyone running digital ad campaigns—whether you’re a small business owner, a marketing pro, or a social media enthusiast tracking ROAS is the compass ensuring you get the most value for every dollar.

So, what exactly is ROAS?

It’s the ratio of revenue generated from your ads to the cost of those ads. In simple terms, it gauges how effectively your advertising dollars are working for you, and the higher percentage ROAS, the better the return on investment.

Timing is crucial in the fast-paced world of online advertising, and that’s where the question of “When do you need ROAS? arises.

The answer is simple: NOW! Whether you’re launching a new product, promoting a sale, or boosting brand awareness, understanding your ROAS in real-time is vital for making data-driven decisions that can steer your campaign towards success.

But why do you need ROAS?

Picture yourself at a carnival, aiming to win the biggest prize with the fewest attempts. ROAS is your strategy to triumph in the digital advertising carnival. It ensures you’re not merely throwing money at the wall but rather targeting your audience effectively and maximizing profit margin.

Where can you find this digital compass?

The beauty of ROAS lies in its accessibility. Major online ad platforms like Google Ads and Facebook Ads provide ROAS metrics right in their analytics dashboards. It’s like having a financial advisor at your fingertips, guiding you through the maze of metrics and performance indicators.

Now, how do you use ROAS?

Using it is as easy as pie! First, calculate it by dividing your revenue from ads by the cost of those ads. Once you have your ROAS, compare it to your goals. If your target is a high ROAS campaign of 5, but you’re currently at 3, it’s time to tweak your strategy. Experiment with different ad creatives, adjust targeting parameters, and monitor the impact on your ROAS.

In conclusion, ROAS is the MVP of digital advertising, and it’s not just for big businesses with deep pockets. Whether you’re a seasoned marketer or dipping your toes into the advertising pool, embrace ROAS as your guiding star to advertising success.

Download The Calculator

The Break Even ROAS Formula or Calculation

RELATED: 6 Simple Ways To Increase Facebook Purchase ROAS For Your Shopify Store

Break-even ROAS is the only formula that will be helping you understand how you’re doing and if your ROAS is good or not. If according to your calculation your actual ROAS is higher than your break even ROAS then that’s good because then, and only then your business is making money.

The return on ad spend and Calculating ROAS

In ROAS calculator that you’re about to download, you will be able to calculate break even ROAS not just for your Facebook ads and ad campaigns but it also applies to businesses that might be dropshipping or warehousing their own products.

This breakeven ROAS online calculator takes into account all of your costs, not just the ad costs and it considers your total revenue, not just the revenue from one ad campaign. In this way, it will also help you understand how much can you actually afford to spend to acquire a new customer and also, it will help you understand how much can you afford to pay for a click. That’s what makes this formula so powerful as it really provides a baseline for how fast can you grow your business.

Example On How To Use This Breakeven ROAS Calculator

Let’s say that you have a fashion store and you are drop shipping. So first of all, you have to order the product from your supplier and then you have other tools and expenses along the way, such advertising costs such as your drop shipping website hosting fees, your eCommerce transaction fees and also things like rent you pay for your office or any staff members you might be paying to help you in your eCommerce business. Last but not least, also consider how much is your time worth when you’re running the business or for those who have their own products, how much time you spent creating your products.

calculating ad spend and return on ad spend

Whether you’re dropshipping or not, there are many costs involved in designing, making and delivering a product to your customer and most entrepreneurs forget to think about it when they are learning how to calculate their break even ROAS. The best way to find the total costs associated with running your business is inside your accounting or bookkeeping software regardless whether you use a sophisticated tool or just spreadsheets.

The other powerful part to this ROAS calculator is that it also helps you understand how much can you actually afford to pay Facebook (or any other ads provider) for a click. Because first you need to get the clicks, then you have to convert them to sales and then you have some average order value and only then can we properly access how to take ad revenue to calculate break even ROAS.

Overview of Drop shipping Costs:

– Ordering products from suppliers.

– Various tools and expenses along the way, including advertising cost, website hosting fees, eCommerce transaction fees, office rent, and staff salaries.

Consideration of Time Investment:

– Reflect on the time spent running the business or creating products (for those with their own products).

Common Oversight in Calculations:

– Entrepreneurs often overlook the comprehensive costs involved in designing, making, and delivering a product to customers when calculating break-even ROAS.

Total Cost Analysis:

– Utilize accounting or bookkeeping software to identify all costs associated with running the business, regardless of the complexity of the tools used (from sophisticated software to simple spreadsheets).

ROAS Calculator Significance:

– Helps determine the affordability of paying for clicks on platforms like Facebook.

– Sequential process: get clicks, convert them to sales, determine order value, and then calculate break-even ROAS.

ROAS Calculator Usage:

– Fill out yellow cells with store analytics data (order value, payment processing fees, shipping fees, product costs, and other expenses).

Calculator Output:

– Provides the break-even ROAS calculation (aim to keep it close to one).

– Determines the affordable amount to spend on acquiring a new customer.

Practical Example:

– Given an order value of $59 and associated costs or average order value (product, shipping, discounts, packaging, insert, and other fees), the break-even ROAS is 1.57.

– Affordability for acquiring a new customer is calculated at $36.54.

In this case,”How much revenue?” is the order value is $59 and the typical cost of products for this type of order value is $9.90, there are $2 shipping costs, an average of 3% discount, $1 fee for packaging, $0.5 fee for an insert and $3 for other fees. Taking into account the payment processing fees of 2.5% and on average a 5% return rate, this leaves us with a break even ROAS of 1.57 which translates into affordability of $36.54 to acquire a new customer.

If you’re not sure what all of these numbers are for you just yet and you’re worried about how to calculate break even or calculate ROAS here, then don’t worry and just make an estimate for now.

What If My Break Even ROAS Calculation Is Too High?

If you’ve just seen the example of ROAS calculator and discovered that your break even ROAS is too high to what you’re able to get from Facebook or other ads, don’t panic!

Because now that you understand your total and additional costs and what’s involved, start thinking about the total revenue potential. For example, are your customers frequently coming back to your drop shipping business or are you perhaps another type of eCommerce business or even a brick and mortar store and your customers often come back? Also, consider if you are selling memberships or if there are any up sells you can create.

Minimum Dollar spent on each ad group

Because if you’re in a position where you can not decrease the cost of acquiring a new customers, then start thinking how to increase your average order value (AOV) or increase the customer lifetime value (CLV).

For example, if you have a solid twenty per cent of returning customers who come back to you over and over then you consider the total potential revenue from a whole advertising campaigns, not just the first sale you made but actually what’s the total potential of that customer acquisition cost.

In this case, you might be more comfortable spending money on ads, because you will be confident that anything you spend on ads will deliver a return on investment for your business even if your first purchase ROAS on ad spend is a little lower because it’s got a huge long term potential.

In general terms, the lower your break even ROAS, the more profit margin in the business. This is the key to deciding for yourself if you can decrease your break even ROAS or if you can increase the profit margin or total revenue potential.

Ideally, you want to make sure that your break even ROAS is as low roas close as possible to 1.0, which in other words means keeping your operational costs low and the efficiency of your marketing campaigns high.

Calculate ROAS stands and Advertising cost

Ad spend, short for advertising spending, refers to the amount of money a business allocates to its advertising campaigns within a specific time frame. It includes expenses related to various advertising channels such as online platforms, print media, television, radio, and other promotional activities. Ad spend is a crucial metric for businesses as it directly influences their marketing budget and overall financial performance.

Managing Returns on Ad spend

Return on Advertising Spend is a key metric used by businesses to evaluate the effectiveness and profit margin of their ad campaigns. Target ROAS is calculated by dividing the revenue generated from the ad campaign by the cost of the campaign. The formula for ROAS is:

Losing Money or Break even point for ad spend

​ROAS provides insights into how well a company is leveraging its budget to generate revenue. A ROAS of 1 means that the business is breaking even, while a target ROAS is greater than 1 indicates that each campaign is generating more revenue than the cost.

Here’s how ROAS helps in calculating costs:

1. Performance Evaluation: ROAS allows businesses to assess the performance of their advertising efforts. A high ROAS suggests that the advertising campaign is efficient in generating revenue, while a low ROAS indicates that adjustments may be needed to improve the campaign’s effectiveness.

2. Budget Optimization: By analyzing ROAS, businesses can optimize their advertising budget. If a particular channel or campaign has a ROAS, allocating more budget to that area may be a strategic decision. Conversely, low-performing channels can be identified and adjusted accordingly.

3. ROI Measurement: ROAS is essentially a form of Return on Investment (ROI) specific to advertising. It provides a clear understanding of how much ad revenue is generated for every dollar spent. This information is crucial for making informed decisions about future advertising investments.

4. Decision-Making Tool: ROAS serves as a valuable tool for decision-making in ads advertising strategy. It helps businesses identify which channels or campaigns are delivering the best results and guides them in making data-driven decisions to optimize efforts.

Why is break even ROAS calculator so important?

Understanding and utilizing a precise break-even Return on Spend calculator is crucial for the future profit margin of your business. This tool is pivotal as it allows you to manipulate various aspects of your business strategy. You can optimize your break-even ROAS by increasing your average value per order, enhancing your conversion rate, encouraging customer retention, or negotiating better deals with suppliers.

If reducing your break-even ROAS proves challenging, focus on the actual cost per click, which determines the number of potential customers for a given spend. Lowering the cost per click, achieved through attractive ads or adjustments to audience size, can increase store visitors for the same budget, potentially turning the gross profit even higher and break-even ROAS.

This comprehensive approach is integrated into the ROAS, offering insights into both sides of your business potential. By simply inputting your average conversion rate, derived from store analytics, the calculator automatically completes the necessary calculations, providing a holistic perspective for informed decision-making.

Manage advertising spend

Once a business establishes its advertising, the next crucial step is actively managing and optimizing it to ensure the highest possible return on investment. Effective management involves continuous monitoring, analysis, and strategic adjustments to align your ad campaign performance efforts with business goals. Here are key strategies to manage efficiently.

Planning Ad Campaign with few steps

Real-Time Monitoring and Analytics:

Implementing robust analytics tools is essential for real-time monitoring of performance. By analyzing key metrics such as click-through rates, conversion rates, and customer acquisition costs, businesses can quickly identify which campaigns or channels are driving results and which may need adjustments.

A/B Testing:

Conducting A/B testing allows businesses to experiment with different ad creatives, copy, and targeting parameters. By comparing the performance of variations, marketers can identify the most effective elements and refine their campaigns accordingly. This iterative approach helps in maximizing the impact over time.

Dynamic Budget Allocation:

Adjusting budget allocations based on performance is crucial for optimizing advertising. Channels or campaigns delivering a good ROAS campaign may warrant increased investment, while under performing ones may require budget cuts or strategic modifications. This dynamic approach ensures resources are allocated where they generate the best results.

Target Audience Refinement:

Continuously refining target audience parameters ensures that advertising messages reach the most relevant audience segments. Analyzing customer demographics, behaviors, and preferences allows businesses to tailor their advertising efforts, leading to improved engagement and conversion rates.

Seasonal Adjustments:

Recognizing and adapting to seasonal trends is vital for effective advertising management. Certain products or services may experience fluctuations in demand during specific times of the year. Adjusting advertising strategies to align with these fluctuations helps in maximizing impact and avoiding unnecessary spending during slower periods.

Leverage Data for Predictive Modeling:

Utilizing historical data, businesses can create predictive models to forecast future performance. This enables proactive decision-making and strategic planning, allowing for adjustments to be made before issues arise, and opportunities are missed.

Cost Negotiation and Vendor Relationships:

Actively negotiating ad costs with vendors and building strong relationships can lead to more favorable terms. This includes exploring discounts, bonuses, or exclusive opportunities that can stretch the budget further.

Adopting Cost-Effective Channels:

Identifying and prioritizing cost-effective advertising costs is crucial for efficient spend management. This may involve shifting focus towards digital channels with lower costs per impression or click, ensuring the budget generates maximum exposure and engagement.

ROAS calculator online

Download The Calculator

Ok not that you have all of the information you need about this break even good ROAS online calculator, all there is left is to just download it and let us know how you liked it by commenting below!

RELATED: The ROAS Formula: How To Keep Your Facebook Advertising Cost Down (4 Super Important Metrics That Tend To Slip Everyone’s Attention)

Silvia Myers

Silvia Myers

Traffic Ninja & eCommerce Coach

Silvia is co-founder of Traffic Ninjas, teaching product makers and brand builders how to sell their incredible products online without having to discount or spend their hard-earned cash on things that don’t work.

Together with her husband and co-founder, Kristen, Traffic Ninjas equip eCommerce stores with an underground Ninja method specifically designed for small business owners, teaching them how to be profitable and sustainable and actually earn an income from selling their products online.

The Traffic Ninjas community has grown from Sydney, Australia to 35+ countries around the world with small business owners achieving amazing results.


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