Break Even ROAS Calculator And How To Calculate It Easily

by | Aug 10, 2022 | eCommerce Coaching, Facebook, Paid Traffic eCommerce

Break even ROAS calculator free download

If the only thing you are after is break even ROAS calculator because you already know everything about it and just need to find how to calculate break even ROAS, then I won’t keep you any longer. Just scroll down and download the calculator online completely free at the very bottom of the page.

If however, you want to learn a bit more about how to use this calculator and also what to be aware of when it comes to calculating your breakeven ROAS and how does that influence the predictability of your sales, then keep reading on.

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.

In the break even ROAS calculator that you’re about to download, you will be able to calculate break even ROAS not just for your Facebook ads and 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 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 dropshipping. 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 as your dropshipping 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.

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 break even 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 calculate break even ROAS.

As you can see from the image below, the first part of the break even ROAS calculator is super easy to use. Essentially, fill out all of the yellow cells with information you’ll find in your store analytics such as average order value, payment processing fees, any shipping fees you pay and then also consider product costs and any other costs.

The break even ROAS calculator online will do the rest for you and it will give you two specific results. The first one will be your actual break even ROAS calculation (ideally you want to keep this as close to one as possible) and the other formula it will give you is how much can you afford to spend on acquiring a new customer.

In this case, the average order value is $59 and the typical cost of products for this type of average 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 ROAS, 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 the break even 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 costs and what’s involved, start thinking about the total revenue potential. For example, are your customers frequently coming back to your dropshipping 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 upsells you can create.

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 campaign, not just the first sale you made but actually what’s the total potential of that customer.

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 is a little lower because it’s got a huge long term potential.

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

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

Why is break even ROAS calculator so important?

Having a precise break even ROAS calculator and having the understanding of how does the breakeven ROAS formula work is extremly important, because the profitable future of your business depends on it.

Essentially, you have multiple levers in your business and you can either decrease your break even ROAS and make more money for your business by increasing your average order value, increasing your conversion rate, by getting your customers to come back to your store or by negotiating better rates with your suppliers (or all of the above).

If you’re unable to decrease your break even ROAS then you might consider the other level which is the actual cost you pay for each click that determines how many potential customers can you get to visit your store for a given amount if money and hence it gives you the potential of the profitability for each advertisement. If for example, you are able to decrease the cost of each click coming to your website (for example by making your Facebook ad more attractive or by changing your Facebook ad audience size) then you will be getting more visitors to your store for the same amount of money and even if your calculation on break even ROAS is a little high, you’ll be able to turn a profit.

That’s why we’ve added this formula into the break even ROAS calculator so that you can understand the potential of your business from both side.

Once again, just fill out the average conversion rate for your store (you’ll find this in your store analytics) and the rest of the calculation will be done for you (it’s taken from the first break even ROAS calculator that we described above).

Break even ROAS calculator online

Ok not that you have all of the information you need about this break even 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.

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

0 Comments

Submit a Comment

Your email address will not be published.

You May Also Like

Related Topics