Break-even ROAS = 1 ÷ gross margin
1 ÷ 0.55 = 1.82
The ROAS entry has the basic sum. This one is about what happens when one business has more than one margin, which most do.
Why does every product line need its own break-even?
Because ad accounts blend them. A shop that sells cheap-to-make goods and expensive-to-make goods side by side gets one ROAS for the account, and that single number can sit comfortably above the shop's average break-even while one line loses money on every sale. The average margin hides which products carry the ads and which ones the ads carry.
Where is a Bathurst coffee roaster losing money inside a ROAS of 3.35? (example figures)
An online coffee roaster in Bathurst sells three lines through Google Shopping: its own beans, espresso machines it buys from a distributor, and grinders and gear. Last month it spent $6,000 on ads and the account reported $20,100 in sales, a ROAS of 3.35.
| Line | Margin | Break-even ROAS | Spend | Sales from ads | ROAS | After ads |
|---|---|---|---|---|---|---|
| Beans | 55 percent | 1.82 | $2,000 | $4,800 | 2.4 | $640 ahead |
| Espresso machines | 20 percent | 5.00 | $3,000 | $12,300 | 4.1 | $540 behind |
| Grinders and gear | 35 percent | 2.86 | $1,000 | $3,000 | 3.0 | $50 ahead |
| Whole account | 30.6 percent | 3.27 | $6,000 | $20,100 | 3.35 | $150 ahead |
The machines have the best-looking ROAS on the page and are the only line losing money. Half the budget went to them because bidding on conversion value chases revenue, and a $1,400 machine is a lot of revenue. The beans, with the lowest ROAS, made the most.
Two fixes, both in the owner's hands. Split the machines into their own campaign with a target above 5, or stop advertising them and let them sell to people who came for the beans. Moving that $3,000 into beans at a ROAS of 2.4 would turn a $540 loss into roughly $960 ahead, if the beans hold their return at the higher spend (they may not, so move it in steps).
When does running below break-even make sense?
When the first order is not the last. Bean buyers reorder, often monthly. A campaign that wins a first bag at a ROAS of 1.5, below the 1.82 line, can still pay if the customer buys four more bags without another ad. That is a decision about payback period, and it needs your repeat figures in front of you before you make it. Machine buyers rarely come back for another machine, so the first sale has to clear break-even by itself.
What should a ROAS target in CoraVision sit above?
Your break-even ROAS: your CoraVision Marketing Performance score can include a ROAS target, and break-even is the floor under it. CoraVision reads campaign spend and conversion value from Google Ads every night, and at launch it also reads Google Merchant Center products and their performance, the product-level figures a line-by-line check like the one above needs.
Questions
Do shipping and card fees belong in the sum?
If you pay them on every order, yes. Take them off the margin first, so you are dividing 1 by the contribution margin. A shop with a 45 percent gross margin that pays 8 percent of each sale in postage and fees breaks even at 2.7, not 2.2.
Should my Target ROAS in Google Ads be my break-even figure?
Set it above. Break-even pays for the ads and leaves nothing for rent, wages or profit. Google Ads takes the target as a percentage, so a ROAS of 3 is entered as 300 percent.
How does a service business work out its break-even ROAS?
The same way, with the labour that delivers the job counted in the cost. A cleaner charging $200 for a job that costs $110 in wages and products has a 45 percent margin and a break-even ROAS of 2.22.