What is a good ROAS? How to work out your break-even ROAS

ROAS, or return on ad spend, is the revenue your ads bring in divided by what you spent on them. Spend ₹10,000 and make ₹40,000 in sales and your ROAS is 4.

Whether 4 is good depends on your margin. A brand with healthy margins can profit at a ROAS of 2, while a brand with thin margins can lose money at 4. The number that tells you is your break-even ROAS.

Break-even ROAS is 1 divided by your contribution margin, written as a decimal. Contribution margin is what is left from each sale after all the costs of making and delivering that sale, before ad spend.

Worked example: you sell a product for ₹1,000 excluding GST. After product cost, packaging, shipping, payment gateway fees and an allowance for returns, you keep ₹400. Your contribution margin is 40%, so your break-even ROAS is 1 ÷ 0.40 = 2.5. Below 2.5 your ads lose money on the first order. Above it they make money.

Same product, but you keep only ₹250 after costs: margin 25%, break-even ROAS 4. Same ads, very different outcome.

Most break-even calculations go wrong because costs are missing. Include everything that happens because of a sale.

Calculate ROAS on revenue excluding GST. The tax is collected on the government's behalf, so it was never your revenue. Including it makes every campaign look better than it is.

Meta and Google each report their own ROAS using their own attribution rules. A customer who saw a Meta ad, then searched on Google and bought, can be counted by both. Add the platform numbers together and you often get more revenue than your store actually made.

Blended ROAS fixes this: total store revenue divided by total ad spend across every platform, for the same period. It is less flattering but it matches your bank account. Watch platform ROAS to compare campaigns, and blended ROAS to decide whether the business is profitable.

If customers come back and buy again, you can accept a lower ROAS on the first order, because the second and third orders cost little or nothing to win. That is the reason email and WhatsApp follow-up matters so much for D2C brands.

Be honest about repeat rate, though. Plan on the repeat behaviour you actually see in your data, not the behaviour you hope for.

Your target should sit above break-even by enough to cover fixed costs and profit. If break-even is 2.5, a target of 3 to 3.5 leaves room for overheads and error. Revisit it whenever prices, costs or return rates change.

If campaigns sit below break-even, look beyond the ads. A faster, clearer product page or checkout raises conversion and ROAS without any change in ad spend, which is the job of conversion rate optimisation.

Before your next budget decision, check these.

Want someone to check the numbers with you? Our eCommerce and D2C marketing starts from exactly this calculation, and a free growth audit will show where your ad spend is leaking.