Break ROAS (Return on Advertising Spend) is a vital metric in digital marketing used by advertisers to evaluate the effectiveness and profitability of their advertising campaigns. It signifies the point at which the revenues generated from advertisements equal the costs incurred, resulting in neither profit nor loss.

How to Calculate Break ROAS

To calculate Break ROAS, use the following formula:

Break Even ROAS = Total Turnover per Product / (Total Turnover per Product - Total Costs per Product)

Given the following information:

  • Purchase value of the product: €45 (including 21% VAT)
  • Shipping costs: €6.95 (including 21% VAT)
  • Transaction costs (Shopify charges): €0.29 (including 21% VAT)
  • Selling price of the product: €170

Calculating profit from ROAS

Calculate the break even ROAS as follows:

Total Costs per Product (excl. VAT) = ((45/121)*100) + ((6.95/121)*100) + ((0.29/121)*100) = €43.22

Total Turnover per Product (excl. VAT) = (170/121)*100 = €140.50

Break Even ROAS = 140.50 / (140.50 - 43.22) = 1.44

What is a Good ROAS?

The assessment of a good ROAS varies based on factors such as industry, product/service, profit margins, and advertiser objectives. Generally, a ROAS of 1:1 is considered the break-even point. A ROAS higher than 1:1 signifies a profitable advertising campaign. Advertisers often aim for a higher ROAS to maximize profits, but this may differ depending on specific goals and strategies.

Conclusion

Break even ROAS serves as a critical metric in assessing the financial viability of advertising campaigns. By determining the point at which revenues equal costs, advertisers can make informed decisions to optimize their campaigns and maximize profitability.