A good ROAS is any ROAS above your break-even ROAS. For most ecommerce brands with 60 to 75% product margins, break-even sits between 1.5 and 2.5 on first orders, so a platform ROAS of 2.5 to 4 is usually healthy. Brands with strong repeat purchase can profitably run lower first-order ROAS.
Why there is no single "good ROAS"
ROAS (return on ad spend) is revenue divided by ad spend. A 3x ROAS means $3 of sales for every $1 spent. Whether that's good depends entirely on what an order costs you to fulfil. A brand selling a $40 product with $25 of costs needs a much higher ROAS than a brand selling a $120 bundle with $30 of costs.
How do you work out your break-even ROAS?
Break-even ROAS = average order value / contribution per order before ads. Contribution is what's left after product cost, postage, packaging, payment fees and returns.
| Average order value | Variable costs | Contribution | Break-even ROAS |
|---|---|---|---|
| $50 | $25 | $25 | 2.0 |
| $75 | $28 | $47 | 1.6 |
| $120 | $40 | $80 | 1.5 |
Anything above break-even makes money on the first order. Anything below loses money unless the customer comes back.
What ROAS should you target?
Set a target ROAS that leaves room for profit and fixed costs. A simple approach is break-even ROAS multiplied by 1.3 to 1.5. If you break even at 2.0, aim for 2.6 to 3.0 in-platform.
Why platform ROAS and real ROAS differ
Meta and Google each count the sales they believe they influenced, and they often claim the same order. Some sales they never see at all, such as people who search for your brand days later. That's why we pair platform ROAS with MER, which is total sales divided by total ad spend.
When a lower ROAS is fine
- You have strong repeat purchase. If customers buy three times a year, the first order can break even and the profit comes later.
- You're building an email list through ads that capture sign-ups as well as sales.
- You're launching and buying data to find winning creative.
Break-even ROAS calculator
Frequently asked questions
Is a 2x ROAS good?
A 2x ROAS is good if your break-even ROAS is below 2. For a product with 50% contribution margin, 2x is exactly break-even, so it only works if customers buy again.
What is a good ROAS on Meta ads?
Most profitable ecommerce accounts run between 2.5 and 4 in-platform on prospecting campaigns, but the right target depends on your margins. Calculate break-even first.
Is ROAS the same as profit?
No. ROAS only compares revenue to ad spend. It ignores product cost, shipping, fees and returns, which is why a high ROAS can still lose money.
Written by Shimeez Bok, founder of Growth Alchemy, an ecommerce growth studio in Auckland, New Zealand.
