Break-even ROAS for Australian ecommerce
Calculate the return your costs require, and the extra return needed to recover a management fee.
By Mark Tran, Step Digital. Reviewed .
What return do your ads need?
Break-even ROAS is the revenue required to cover the costs in your calculation, divided by ad spend. With a management fee included, the formula is (ad spend + management fee) ÷ (ad spend × contribution margin). Enter the margin as a decimal: 60% becomes 0.60.
This covers variable costs, advertising and management. It does not cover fixed overheads unless you explicitly include them in a wider calculation. It also does not establish that the advertising caused every sale credited to it.
I start here because a platform target is only useful once you know what the business can afford.
Calculate your required return
The starting numbers are a worked example, not a quote or a client result. Use the same period, currency and tax basis for all inputs. This calculator does not calculate GST.
Use the total spend for the activity you are assessing.
After product and other variable costs; before ads and management.
Enter zero if you manage the ads yourself.
Used to calculate the extra return needed to recover a new fee.
Break-even before fixed overheads
2.00x
Revenue required: $20,000.00 per month.
- Return to recover a new fee
- 3.33x
- Extra return needed
- 0.33 points
- Extra revenue needed for the fee
- $3,333.33
- Contribution at your current return, after ads and fee
- $6,000.00
Fee recovery assumes unchanged ad spend and margin, with the fee newly added to your current performance. Fixed overheads and costs outside your margin input remain unpaid. A platform-reported ROAS does not establish incremental revenue.
Use contribution margin, not just product margin
If an A$100 order leaves A$60 after the costs that vary with that order, the contribution margin before advertising is 60%. Product cost is only part of the calculation. Consider payment fees, packaging, fulfilment, shipping subsidies and the expected cost of returns where they apply.
Keep the revenue and cost definitions consistent. For example, do not deduct returns twice if your revenue is already net of refunds. Prepare all figures on the same tax basis; the calculator does not add or remove GST. Confirm the appropriate treatment with your accountant if your reports use different bases.
For a mixed catalogue, use a margin that reflects the products actually being sold. A profitable average across the whole store can hide an advertised product with much tighter economics.
A worked example: break-even is 2.00x
These are illustrative numbers, not a client result or a fee quote.
| Input | Amount |
|---|---|
| Ad spend | A$10,000 |
| Management fee | A$2,000 |
| Contribution margin before ads | 60% |
| Revenue required | A$20,000 |
| Break-even ROAS before fixed overheads | 2.00x |
A$20,000 of revenue leaves A$12,000 at a 60% contribution margin. Ad spend and management also total A$12,000. Nothing remains for fixed overheads or profit at that threshold.
Covering a new management fee is a different question
Suppose the same account already produces A$30,000 of revenue on A$10,000 spend, a 3.0x return. At a 60% contribution margin, it leaves A$8,000 after advertising and before management.
If you then add an A$2,000 management fee, preserving that A$8,000 requires another A$3,333.33 of revenue: A$2,000 ÷ 0.60. At unchanged ad spend, the required return rises from 3.0x to approximately 3.33x.
The calculator shows both thresholds. 2.00x covers the example's included costs; 3.33x preserves its previous contribution after adding the fee. Both assume the same spend and margin. If either changes, recalculate.
What this calculation cannot tell you
- Whether the ads caused sales that would not have happened otherwise.
- Whether new customers will reorder, or what those future orders will contribute.
- How much cash you need for stock, returns and the timing of payments.
- Whether a platform's attributed revenue matches your store's revenue definition.
A first-order loss might be acceptable for a business with evidenced repeat-purchase economics and the cash to support it. It should be a deliberate decision, not an assumption hidden inside a ROAS target.
Before applying the threshold to campaign reports, read why Meta, Google and Shopify revenue differs. For account-specific help, see my Google Ads management and Meta Ads management services.
Method
The examples are arithmetic models using the stated inputs, not advertising benchmarks. The calculator treats variable costs as a constant percentage of revenue and management as a fixed amount for the chosen month. Change the inputs when the product mix, fee or spend changes.