What break-even ROAS means
Break-even ROAS, often shortened to BEROAS, is the return on ad spend where a product makes neither a profit nor a loss. Beat it and you are in the green. Fall short and every sale costs you money, even if the campaign looks like it is performing.
The formula is the one most dropshippers memorise:
Break-even ROAS = 1 / profit margin
Profit margin here is your contribution margin before ad spend: selling price minus everything it costs to deliver the order, divided by the selling price. Written out with prices:
Break-even ROAS = selling price / (selling price - unit cost)
Why this is the dropshipping number
Dropshipping margins are thin, so the break-even point sits high. A store with a 25% margin needs a 4x ROAS just to stay level, while a store with a 60% margin breaks even at 1.67x. Same ad account, completely different definition of "good." That is why a single industry benchmark for ROAS is useless: your break-even ROAS is the only target that reflects your actual product economics.
Generic ROAS calculators ignore this. They tell you the ROAS you got, not the ROAS you needed. This tool gives you the target.
How to read your break-even ROAS
Once you have the number, the rule is simple:
- Actual ROAS above break-even ROAS: the product is profitable. The bigger the gap, the more room you have to scale spend.
- Actual ROAS at break-even ROAS: you are paying for sales at cost. Fine for a launch or to clear stock, not a long-term position.
- Actual ROAS below break-even ROAS: you are losing money on every order. Cut the campaign, raise the price, or find a cheaper supplier.
Compare it directly against the figure from the ROAS calculator.
A worked example
You sell a product for $50. Your unit cost (product plus shipping plus payment fees) is $30.
- Selling price: $50
- Unit cost: $30
- Profit margin: (50 - 30) / 50 = 40%
- Break-even ROAS = 1 / 0.40 = 2.5x
So you need a ROAS above 2.5x to make money. If Facebook reports a 3.5x ROAS, you are profitable. If it reports 2.2x, you are losing money despite a number that looks fine at a glance.
Find a competitor's price and cost signals
To estimate a rival's break-even ROAS you need their selling price and a read on their product cost. Koala Inspector is the Chrome extension that surfaces the live ads, best-selling products, and pricing on any Shopify store, so you can model the margins of a niche before you commit a budget to it. See the wider toolkit in our Shopify spy tools list.
