Break-even ROAS explained: the number every Australian online store should know

Most founders running paid ads can quote their ROAS. Far fewer can tell you what ROAS they need. That second number — break-even ROAS — is the line between campaigns that build a business and campaigns that quietly drain it. It takes about five minutes to work out, and it changes how you read every dashboard you look at afterwards.

What is ROAS, and why isn’t it the same as profit?

ROAS stands for return on ad spend. It’s revenue attributed to your ads divided by what you spent on them. Spend $1,000 and get $3,000 of attributed sales, and your ROAS is 3x.

The trap is that ROAS measures revenue, not profit. A 3x ROAS sounds excellent, but whether it makes money depends on what each sale costs you to deliver. Revenue has to cover:

• GST, if you’re registered — one-eleventh of GST-inclusive prices belongs to the ATO.
• Landed product cost — the goods plus freight in, duty and brokerage.
• Shipping and packing — what you pay to get the order to the customer.
• Payment and platform fees — card processing, marketplace commissions and app costs.
• Returns and discounts — refunds, exchanges and codes.

Only what’s left after all of that is available to pay for the ads. That leftover is your contribution per order.

How do I calculate break-even ROAS?

The formula is simple:

Break-even ROAS = average order value ÷ contribution per order

Here’s a worked example for an illustrative store selling at an average GST-inclusive order value of $80.

Line	Amount
Average order value (GST inclusive)	$80.00
Less GST (one-eleventh)	−$7.27
Less landed product cost	−$24.00
Less shipping and packing	−$9.50
Less payment fees (about 3% of order)	−$2.40
Contribution per order	$36.83
Break-even ROAS ($80 ÷ $36.83)	2.17x

Illustrative only. Figures rounded.

In this example, campaigns need to return at least $2.17 in sales for every $1 of ad spend just to cover their own cost on the first order. At 3x, the store is making money on each new customer. At 1.8x, it’s losing money on the first order — which may or may not be fine, depending on what happens next.

The ad-spend payback calculator does this calculation for you and goes a step further, showing how long customers take to repay their acquisition cost.

Why does my ads dashboard look better than my bank account?

This is the question behind most “we’re growing but always broke” conversations. Four common reasons:

1. GST is included. Platforms usually report the price the customer paid. If you’re registered, a slice of that was never yours.
2. Costs aren’t included. A dashboard ROAS knows nothing about your product, shipping or fees.
3. Returning customers are counted. Attribution often credits ads for sales from existing customers who might have bought anyway, inflating apparent performance on new customer acquisition.
4. Attribution windows overlap. When several platforms each claim the same sale, adding up platform ROAS overstates the total.

None of this means dashboards are useless. It means they need translating. A simple cross-check is MER — marketing efficiency ratio — which divides total revenue by total marketing spend across every channel. It’s blunt, but it can’t double-count.

If your numbers already look healthy and you want to scale, you can see what funding might be available for ad spend and stock. There’s no credit check to enquire.

What about customers who buy again?

Break-even ROAS only looks at the first order. For many brands, the real profit comes later. A skincare customer who reorders every two months is worth far more than their first purchase suggests.

That’s why the better test for scaling is CAC payback: how long it takes a new customer’s contribution — first order plus repeats — to cover what you spent to acquire them.

Scenario	First-order result	Payback	What it means
Above break-even ROAS	Profit on first order	Immediate	Ads fund themselves; stock and cash timing are the limits
Slightly below, strong repeat	Small loss on first order	A few months	Workable if repeat behaviour is proven, needs working capital
Well below, weak repeat	Large loss on first order	Beyond a year, or never	Fix economics before spending more

The key word in the middle row is proven. Many founders assume customers will come back. Look at your actual repeat data — orders per customer over 12 months — before you rely on it.

How can I lower my break-even ROAS?

Break-even ROAS falls when contribution per order rises. The levers:

• Raise average order value. Bundles, free-shipping thresholds and genuine upsells spread fixed costs like shipping across more revenue.
• Reduce landed cost. Better supplier pricing at volume, cheaper freight modes for predictable lines, fewer air-freight emergencies.
• Tighten shipping. Right-sized packaging, negotiated rates or a 3PL at scale. See moving to a 3PL.
• Review fees. App subscriptions and payment options add up; cut the ones that don’t earn their keep.
• Price properly. Especially around GST registration. The GST milestone page shows how registration shifts break-even ROAS.
• Reduce returns. Better size guides, product photos and descriptions protect contribution.

Each of these improves every campaign at once, which is why fixing economics usually beats tweaking creative.

Should I borrow to scale ads?

Only if the numbers say so. Borrowing for ads makes sense when:

1. Contribution per order is positive and known.
2. Customers repay their acquisition cost within a period you can comfortably fund.
3. There’s stock to fulfil the orders the extra spend creates.

If campaigns sit below break-even and repeat purchase is weak, borrowing enlarges the loss. If campaigns are comfortably above break-even and stock is the constraint, funding can be the difference between a good month and a great year. The ad spend funding page covers how that’s usually structured.

A quick checklist before your next budget increase

• I know my contribution per order after GST, landed cost, shipping and fees.
• I’ve calculated break-even ROAS and compared it with new-customer ROAS, not blended ROAS.
• I know orders per customer over 12 months from real data.
• I’ve tested what happens if CAC rises as I scale.
• I have, or can fund, the stock the extra orders will need.

If you can tick all five, you’re making decisions on numbers rather than hope.

How do I find my true new-customer ROAS?

Blended ROAS mixes new and returning customers. To judge acquisition properly, separate them:

1. Pull new-customer revenue for the period from your store’s customer reports — first orders only.
2. Total your paid acquisition spend across every platform for the same period, including agency or creator fees tied to acquisition.
3. Divide the first by the second. That’s your new-customer ROAS.
4. Compare it with break-even ROAS. Above the line, each new customer pays for themselves on the first order. Below it, you’re relying on repeat orders.

Many founders are surprised by how different this figure is from what the ad platforms report. Platforms often attribute sales to ads that would have happened anyway — a returning customer who clicked an ad on the way to buying, for example. Your new-customer ROAS strips that out.

It’s worth tracking weekly during any scale-up. If it starts sliding towards break-even as spend rises, the extra budget is buying more expensive customers, and it’s time to pause and fix creative, audiences or offer before committing more.

Ready to scale on numbers you trust?

Once you know your break-even ROAS and payback, you’re in a strong position to decide whether extra funding for ads and stock makes sense. If it does, start a 60-second enquiry and bring your figures along. There’s no credit check to ask, your details go to one person who understands online marketing rather than being fired off to a list of lenders, and that person will call to talk it through. The more accurately you fill in the form — revenue, time trading and any property — the better the first match will be. If you’re weighing a stock purchase too, the cash conversion cycle guide is the natural next read.