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Break-Even ROAS Calculator

Calculate your profitability, find your break-even point, and understand the true cost of customer acquisition for your e-commerce business.

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73%
of ecommerce brands don’t track ROAS correctly
3.2:1
average break-even ROAS for fashion e-commerce
£32
max customer acquisition cost example

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What Is Break-Even ROAS?

ROAS (Return on Ad Spend) measures how much revenue you generate for every pound spent on advertising. Your break-even ROAS is the minimum efficiency you need from paid ads just to avoid losing money.

For example, if your break-even ROAS is 3:1, you need to make £3 in revenue for every £1 spent on ads. Anything below this ratio means you’re losing money on advertising.

Formula: Break-Even ROAS = Selling Price ÷ Gross Profit Per Unit
Example: £100 selling price ÷ £30 gross profit = 3.33:1 ROAS needed

Why ROAS Matters for Your E-Commerce Business

Many e-commerce founders (especially new ones) make the same mistake: they focus on revenue instead of profitability. You can have £10,000 in monthly sales and still lose money every month.

The Problem with Ignoring Unit Economics:

  • You spend more on ads than you make in profit
  • You scale the business and scale losses alongside it
  • Running out of cash before profitability
  • Unsustainable growth (each sale costs you money)
  • Banks and investors won’t fund you
Real Example: An abaya brand selling at £100 with £60 COGS, £5 shipping, and £3 packaging has only £32 gross profit per unit. If they spend £50 per customer on ads, they lose £18 on every sale—regardless of revenue numbers.

Understanding Unit Economics

Unit economics is how much profit you make on each individual sale. This is the foundation of every sustainable business.

The Unit Economics Hierarchy:

1. Selling Price

What the customer pays (£100)

2. Cost of Goods Sold (COGS)

Manufacturing (£60) + Shipping (£5) + Packaging (£3) + Returns (£2) = £70

3. Gross Profit = £30

What’s left after product costs (before fixed costs & ads)

Why COGS Breakdown Matters:

Many founders overlook hidden costs in their COGS. A £60 manufacturing cost looks simple, but when you add:

  • International shipping: £5-15 per unit
  • Packaging quality: £2-5 per unit (branded boxes, tissue, filler)
  • Returns/refunds: 5-10% of sales lost to returns
  • Payment processing: 2-3% per transaction (Stripe, PayPal)

Complete Cost Breakdown

To calculate true profitability, you need to account for ALL costs—not just COGS. This includes fixed monthly costs that don’t change with sales volume.

Variable Costs (Per Unit):

Cost Category Typical Range Example
Manufacturing £40-80 £60
Shipping (outbound) £3-8 £5
Packaging & materials £2-4 £3
Returns allowance (5%) £2-5 £2
Total COGS £47-97 £70

Fixed Monthly Costs:

Category Covers Range
Platform fees Shopify, WooCommerce, hosting £29-300
Email marketing Klaviyo, ConvertKit £0-500
Staff / freelancers Customer service, design £0-5,000
Warehouse / storage Inventory, fulfillment £0-2,000
Total Fixed Month-to-month baseline £29-8,600

The Profitability Formula

Step 1: Gross Profit Per Unit

Gross Profit Per Unit = Selling Price – COGS
Gross Profit Per Unit = £100 – £70
Gross Profit Per Unit = £30

Step 2: Break-Even ROAS

Break-Even ROAS = Selling Price ÷ Gross Profit
Break-Even ROAS = £100 ÷ £30
Break-Even ROAS = 3.33:1

Step 3: Monthly P&L

Monthly Revenue = £100 × 10 units = £1,000
Monthly COGS = £70 × 10 units = £700
Gross Profit = £300
Fixed Costs = £30
Net Profit (before ads) = £270
Final Profit = £170 (after £100 ad spend)
Key Insight: Even at 10 units/month, you can only afford £10 per unit on ads (£100 ÷ 10) and stay profitable. This is why pricing and cost control are critical.

Interactive Calculator

Product Costs

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Fixed Monthly Costs

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units
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Your Results

Gross Profit Per Unit
£30
Revenue minus COGS
Break-Even ROAS
3.33
Minimum ad efficiency
Max Cost Per Purchase
£30
Budget limit per sale
Monthly P&L
£170
Net profit after ads

Detailed Breakdown

Monthly Revenue £1,000
Total COGS -£700
Gross Profit £300
Fixed Costs -£30
Ad Budget -£100
Net Profit £170

Frequently Asked Questions

Q: What’s a “good” ROAS?
A: It depends on your profit margin. For fashion, 2.5:1 to 4:1 is typical. Your break-even ROAS is the absolute minimum. Aim for 1.5-2x your break-even ROAS to have real profit. So if break-even is 3:1, target 4.5-6:1 ROAS from ads.
Q: My break-even ROAS is too high. What do I do?
A: You have three options: (1) Raise your price—increases gross profit per unit, (2) Lower COGS—negotiate better manufacturing or shipping rates, or (3) Reduce fixed costs—cut subscriptions you don’t need.
Q: Why do I need to account for returns?
A: Returns are real costs—you lose the profit on that sale plus often pay return shipping. Fashion typically sees 5-10% returns. This reduces your effective gross profit. Always budget for it.
Q: How often should I update my numbers?
A: At least monthly. Track your actual numbers: average order value, real COGS, refund rate, fixed costs. Use this calculator to compare projections vs. reality.
Q: Should I include payment processing fees?
A: Yes—Stripe, PayPal all charge 2-3% per transaction. For £100 sales, that’s £2-3 per unit. Add it to your COGS. You can add it to manufacturing or create a separate line.

About This Calculator: Designed for e-commerce founders, this tool calculates break-even ROAS, gross profit margins, customer acquisition costs, and monthly P&L projections. Perfect for Shopify, WooCommerce, and DTC brands.

Keywords: Break-even ROAS calculator, unit economics, e-commerce profitability, customer acquisition cost (CAC), gross margin calculator, Shopify metrics, fashion e-commerce.

Last updated: April 2026 | For most current information, consult with a business advisor.