Short answer: ROAS = revenue ÷ ad spend, and break-even ROAS = 1 ÷ gross margin. At a 40% margin you break even at 2.5×, so ₹1,50,000 of revenue from ₹50,000 of ads (3× ROAS) leaves ₹10,000 of contribution after ads (₹1,50,000 × 40% − ₹50,000). Any ROAS below your break-even figure loses money on every sale, however good it looks in Ads Manager.
How to use the ROAS calculator
- Ad spend (₹): what you spent on the campaign or channel for the period.
- Revenue (₹): the revenue attributed to that spend. For a decision-grade number, use revenue net of GST, cancellations and returns.
- Gross margin (%): the share of revenue left after product cost. For a more realistic break-even point, also subtract shipping, payment-gateway fees and expected returns, so the figure is your margin before advertising.
- Read ROAS, contribution after ads (₹) and break-even ROAS. A negative contribution means the ads cost more than the margin they produced.
Using it as a ROAS breakeven calculator before launch: you only need one field. Enter your gross margin and the break-even ROAS appears straight away, with no spend or revenue required. Example: a product with a 25% margin after product cost, shipping and gateway fees needs 1 ÷ 0.25 = 4× ROAS just to break even, so a campaign reporting 3× is losing money on every order before overheads. Set your campaign target above that line, as explained under target ROAS below.
ROAS and break-even ROAS formulas explained
- ROAS = revenue ÷ ad spend
- Contribution after ads = revenue × gross margin − ad spend
- Break-even ROAS = 1 ÷ gross margin (margin as a decimal, so 40% becomes 0.40)
Break-even works because each rupee of revenue keeps only the margin. At 40%, ₹1 of revenue covers ₹0.40 of ad cost, so you need ₹2.50 of revenue for every ₹1 of ads just to stand still.
Worked example — a Jaipur skincare D2C brand. It spends ₹2,00,000 on Meta ads in a month and Ads Manager reports ₹7,00,000 in purchases. Its margin after product cost, shipping and gateway fees is 35%.
- ROAS = ₹7,00,000 ÷ ₹2,00,000 = 3.5×
- Contribution = ₹7,00,000 × 0.35 − ₹2,00,000 = ₹2,45,000 − ₹2,00,000 = ₹45,000
- Break-even ROAS = 1 ÷ 0.35 = 2.86×
Now suppose the ₹7,00,000 includes 18% GST. Net revenue is ₹7,00,000 ÷ 1.18 = ₹5,93,220. ROAS drops to 2.97× and contribution to about ₹7,627 (₹5,93,220 × 0.35 − ₹2,00,000). The campaign is barely above break-even — a very different decision from the one the 3.5× headline suggests.
Break-even ROAS by margin
These figures are calculated with the formula above, not industry averages. Find your margin and you have your floor:
| Margin before ads | Break-even ROAS | Same figure as a Google Ads % |
|---|---|---|
| 20% | 5× | 500% |
| 25% | 4× | 400% |
| 30% | 3.33× | 333% |
| 40% | 2.5× | 250% |
| 50% | 2× | 200% |
| 60% | 1.67× | 167% |
| 70% | 1.43× | 143% |
Google Ads expresses ROAS as a percentage: its Target ROAS help page describes a 500% target as ₹5 of conversion value for every ₹1 spent. Multiply this tool's multiple by 100 to get the Google Ads figure.
Setting a target ROAS that leaves profit
Break-even is a floor, not a goal. If you want ads to leave a set share of revenue as profit, use target ROAS = 1 ÷ (margin − desired profit share). At a 40% margin, keeping 10% of revenue after ads needs 1 ÷ (0.40 − 0.10) = 3.33×. Check it: on ₹3,33,000 of revenue from ₹1,00,000 of ads, contribution is ₹1,33,200 − ₹1,00,000 = ₹33,200, about 10% of revenue. If you do not know your margin yet, work it out with the profit margin calculator first.
Common mistakes and how to fix them
- Using GST-inclusive revenue. It overstates ROAS by 18% on most goods. Divide by 1.18 (or your rate) before you enter revenue.
- Ignoring returns and RTO. Cash-on-delivery orders that are refused never become revenue. Use delivered revenue, or reduce your margin by your return rate.
- Entering a markup instead of a margin. A product bought at ₹500 and sold at ₹1,000 has a 100% markup but a 50% margin. Entering 100 makes break-even look like 1×.
- Double-counted purchases. If the pixel fires twice, ROAS doubles. Audit with our guide to fixing duplicate conversions.
- Judging prospecting on first-order ROAS alone. New-customer campaigns can run near break-even if repeat purchases are strong; retargeting usually shows a higher ROAS because it reaches people who were already likely to buy.
Practical use cases
- D2C brand: set a different break-even ROAS for each category, because a 65%-margin serum and a 30%-margin gift box cannot share one target.
- Shopify store on Google Shopping: convert break-even into a Target ROAS percentage before switching bid strategy.
- Restaurant delivery campaign: use margin after aggregator commission, which can halve the break-even headroom.
- Agency report: show contribution after ads in rupees beside ROAS, so a client sees profit, not just a multiple.
For how ROAS fits a full D2C plan, read full-funnel performance marketing for D2C brands.
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Frequently asked questions
What is a good ROAS?
A good ROAS is one above your break-even ROAS, which is 1 divided by your margin before ads. A brand with a 60% margin profits at 2×, while a brand with a 25% margin loses money below 4×. There is no single good number across businesses, so calculate your own floor before judging a campaign.
How do you calculate break-even ROAS?
Divide 1 by your gross margin written as a decimal. A 40% margin gives 1 ÷ 0.40 = 2.5×, meaning you need ₹2.50 of revenue for every ₹1 of ad spend to cover product cost and ads. Use a margin that already subtracts shipping, gateway fees and returns for a realistic break-even point.
Is ROAS the same as ROI?
No. ROAS compares revenue with ad spend only. ROI compares profit with the total investment, including product cost, fees and overheads. A 3× ROAS can be a loss if margins are thin. This calculator bridges the two by showing contribution after ads, which is revenue × margin minus ad spend.
Should ROAS be calculated with or without GST?
Without GST for business decisions, because the tax you collect is passed to the government and is not income. Many ad platforms report purchase values that include GST, which overstates ROAS by about 18% on standard-rated goods. Divide platform revenue by 1.18 before entering it.
How do I convert ROAS to the percentage Google Ads uses?
Multiply the multiple by 100. A 3× ROAS equals 300% in Google Ads, and a break-even ROAS of 2.5× equals 250%. When you set a Target ROAS bid strategy, enter a percentage at or above your break-even percentage, otherwise the bidder will chase revenue that loses money.