What Is a Good ROAS for Ecommerce? Find Your Break Even

Key Takeaways

• A good ROAS is whatever sits above your break even, and break even is 1 divided by your contribution margin, so the answer is different for every store.
• In our worked UK example, a £120 order leaves £45.35 of contribution after VAT, product cost, delivery, packaging, payment fees and a returns allowance, which is a 45.35% margin and a break even near 2.2x.
• Because Google usually records the VAT inclusive order value, a 400% ROAS on that basis is only about 333% on revenue excluding VAT, so check which basis your target uses.
• At 50% contribution margin break even is 2x, at 25% it is 4x and at 20% it is 5x, which is why "4x is good" is meaningless without the margin behind it.
• We work to a floor of at least 2x across the accounts we manage, and achievable ROAS has been drifting down for several years as auction prices have risen.
• Fix waste before you raise a target. When we audit a new client's advertising, an average of 30% of spend is wasted. Across the accounts we manage, cost per acquisition falls by an average of 45% in the first 90 days.
• Break even is not a target. Decide how much contribution you need to keep per order first, then the target follows from the arithmetic.

Quick Answer

There is no universal good ROAS for ecommerce. Work out your contribution margin on revenue excluding VAT, divide 1 by it to get your break even ROAS, then set a target high enough to leave the contribution your business needs after advertising. A store at 50% contribution margin breaks even at 2x, while a store at 20% needs 5x just to stand still, so the published three to five times figures mean nothing without your own numbers.

Table of Contents

• What ROAS Measures and What It Leaves Out
• Why There Is No Universal Good ROAS
• How to Calculate Your Break Even ROAS
• Break Even ROAS at Different Margins
• The VAT Trap in UK ROAS
• From Break Even to a Target
• When a Lower ROAS Is the Right Call
• ROAS, Contribution and POAS
• Why Shopify and Google Ads Disagree
• How to Read Published Benchmarks
• Why Matters Perspective
• Frequently Asked Questions
• Final Thoughts
• Related Articles

Search for a good ecommerce ROAS and you will be told three times, four times, or somewhere between three and five. None of those numbers can be right for everyone, because ROAS measures revenue against ad spend and says nothing about what that revenue costs to deliver. This guide works out the number that matters for your store instead, with a full UK example.

What ROAS Measures and What It Leaves Out

ROAS is return on ad spend: attributed conversion value divided by advertising cost. Spend £1,000, generate £4,000 of attributed revenue, and you have a 4x ROAS, or 400%. Google uses the same relationship for Target ROAS, and its own documentation gives the example of £5 of conversion value for every £1 of cost as a 500% target.

What the formula leaves out is everything that stands between revenue and money in the bank: VAT, product cost, packaging, fulfilment, delivery subsidies, card fees, returns, discounts, customer service and overhead. It also tells you nothing about who bought. A first order from a new customer, a repeat order from a loyal one and a subscription signup can all report the same value while being worth completely different amounts over a year.

Why There Is No Universal Good ROAS

Two stores each spend £1,000 on Google Ads and each generate £4,000 of revenue, so both report 400%. Store A runs at 60% contribution margin, which is £2,400 of contribution, leaving £1,400 after the ad spend. Store B runs at 20%, which is £800 of contribution, so the same 400% leaves it £200 down before a penny of fixed cost. Store B would need 5x just to break even.

That is the whole argument against generic benchmarks. The same number is a strong result for one business and a loss for another, and no benchmark can tell you which you are without knowing your costs.

How to Calculate Your Break Even ROAS

The formula is simple: break even ROAS equals 1 divided by your contribution margin. The work is in calculating the margin honestly, and the only rule that matters is consistency, because the margin and the advertising conversion value must use the same revenue basis.

Take a UK product selling at £120 including VAT. The standard VAT rate is 20%, so removing it leaves £100 of revenue that belongs to the business. Then come the variable costs: £40 of product cost, a £5 delivery subsidy and £2 of packaging. Payment processing depends on your plan, and Shopify UK publishes an online standard card rate of 2% plus 25p on Basic, which is £2.65 on a £120 order, falling to 1.7% on Grow, 1.5% on Advanced and 1.3% on Plus. Finally a £5 returns allowance, which is our modelling assumption rather than a market figure.

That leaves £45.35 of contribution on £100 of net revenue, a 45.35% contribution margin, and a break even of about 2.21x on the ex VAT basis. On returns, Retail Economics and ZigZag forecast that 19.5% of UK online non food purchases would be returned in 2025, against 21% in 2024, but rates vary so much between clothing, coffee, cosmetics and pet food that we prefer a per order allowance covering reverse logistics, processing, damaged stock and markdown.

Break Even ROAS at Different Margins

Once you know your contribution margin, the break even follows directly. This table assumes the margin and the conversion value use the same revenue basis.

Read that curve before accepting any benchmark. At 50% margin, a 4x result is double break even. At 25% it is exactly break even. At 20% it is a loss on every order, and no amount of optimisation changes the arithmetic, because the problem is the product economics rather than the campaign.

The VAT Trap in UK ROAS

This catches more UK stores than any other detail here. Your contribution should be calculated on revenue excluding VAT, because VAT is collected for HMRC and never belongs to you. But Google Ads is usually sent the checkout value, and for a standard rated UK sale that includes VAT. A campaign showing 400% on VAT inclusive revenue is roughly 333% on the ex VAT basis, which is the difference between a healthy account and a marginal one.

Neither basis is wrong, but you have to know which you are looking at. Google says connecting Shopify through the Google and YouTube app can create a purchase conversion action and makes it the primary purchase action by default, and current documentation does not state one universal rule about whether that value includes VAT and delivery. Shopify's own tagging example maps the checkout total price to the conversion value, and its web pixel documentation says that total includes duties, taxes and discounts.

So verify rather than assume. Place one real order and compare four numbers: the Shopify order total, the ex VAT revenue, the delivery charge and the conversion value that arrives in Google Ads. Whatever basis you find, set the target on that same basis.

From Break Even to a Target

Break even is where you stop losing money, not where you want to be, because fixed costs and profit still need funding. Start instead with what you want to keep. If the business wants £10 of contribution left after advertising on our example order, the maximum allowable ad cost is £35.35, which is a target of about 283% on the ex VAT basis or 339% if Google is recording the full £120.

Google expects the target as a percentage, so 2x is 200% and 4x is 400%. It predicts conversion value and adjusts bids to hit the average you ask for, and warns that a target set too high can limit traffic, which is the trade off most accounts underestimate: £10,000 of revenue at 600% can produce less total profit than £50,000 at 400%. Google also says its bidder reacts immediately to a change but needs time to reach the new target, and recommends allowing roughly one to two conversion cycles before judging the result, so do not move the number because one day looked weak.

Before you raise a target, look for waste. When we audit a new client's advertising, an average of 30% of spend is wasted, so an audit of search terms, products and the feed is often worth more than a new number in the bidding settings.

When a Lower ROAS Is the Right Call

A first order ROAS below target can still be the right commercial decision when the customer comes back. Two customers each spend £100, but if one goes on to make four more purchases, those two identical first orders are worth very different amounts. Subscriptions take this further, producing contribution across many billing cycles, and our guide to Google Ads for subscription brands explains how to bid on lifetime value, though a subscription never turns an unprofitable acquisition into a profitable one by itself, and any lifetime value case should rest on your own cohort data rather than optimism.

Three other situations justify accepting less. A launch where the point is awareness, data and first customers. Clearance, where shifting £50,000 of obsolete stock frees cash and warehouse space that are worth more than the margin. And genuinely repeat categories such as coffee, supplements, skincare and pet food, where the second and third orders are the business model, provided you measure the repeat rate rather than assume it.

ROAS, Contribution and POAS

Three measures answer three different questions, and most disagreements about advertising performance are really disagreements about which one is being quoted.

POAS, profit on ad spend, is appealing because it sounds like the number that matters. £1,500 of contribution on £1,000 of ad spend gives 1.5. The catch is that profit means gross profit to one person, contribution to another and net profit to a third, so POAS is only useful once everyone agrees which definition and which data feed it.

Why Shopify and Google Ads Disagree

They will never match exactly, and chasing identical numbers wastes time. Attribution differs: Google uses its own models and conversion windows, while Shopify offers last non direct click, last click, first click, any click and linear models. Reporting dates differ too, because Google reports conversions against the time of the ad interaction by default rather than when the order landed, with a separate view by conversion time.

Revenue definitions differ as well. Shopify says marketing attributed sales can include gross sales, shipping and taxes depending on the report, and can exclude discounts and reversals. Returns add another gap, because a Google Ads conversion value stays recorded unless the data is adjusted, even after the customer sends the order back. And international stores sell in several currencies while Google reports in the account currency. The aim is not identical figures. It is knowing what each number contains and which decision it should support.

How to Read Published Benchmarks

Before you borrow anyone's ROAS figure, ask what sits behind it: which country, which industry, which channel, which period, how big the dataset was, whether revenue includes VAT and delivery, how branded traffic was treated, what the customer mix looked like, which attribution model produced it and whether the figure is a mean or a median. Most published numbers cannot answer half of that.

Even Google's 500% example is arithmetic, not a benchmark. Use external figures to generate questions, not targets. If your break even is 280%, then 350% may be a useful goal. If your break even is 500%, someone else's view that 4x is good would have you losing money on every order.

Why Matters Perspective

Across the accounts we manage, we work to a floor of at least 2x, and we have watched achievable ROAS drift down over the past few years as auction prices have risen. That floor is not a benchmark, it is a starting position, and it only makes sense because it maps to a contribution margin near 50%. A store at 25% margin that adopted our floor would be losing money on every order, which is exactly the mistake this article exists to prevent.

Two measured figures sit alongside that floor. When we audit a new client's advertising, an average of 30% of spend is wasted, and across the accounts we manage, cost per acquisition falls by an average of 45% in the first 90 days. Neither is a promise for any single account, but together they show why we start every engagement with an audit rather than a new target.

An account wide 600% ROAS can still be commercially incomplete. It matters whether the sales came from high margin or low margin products, from discounted stock, from new customers or from people who would have bought anyway, and how many of those orders came back as returns. A tightly constrained brand campaign can report a spectacular number while adding very little demand, and a non brand campaign acquiring new customers at a lower first order ROAS can create far more value over a year.

So we work the other way round: start with revenue excluding VAT, subtract product cost, fulfilment, packaging, payment fees, delivery subsidy and expected returns, decide how much contribution the business needs to keep, and let the allowable ad cost and the target follow. That is what we mean by managing around profit rather than revenue. If you would like us to run those numbers with you, our free Google Ads account review covers targets, tracking, feed and structure. Our PPC management starts from £650 a month plus VAT, and it is billed a month in arrears with no long contracts.

Frequently Asked Questions

What is a good ROAS for ecommerce?

There is no universal figure, because a good ROAS is whatever sits comfortably above your break even, and break even depends on contribution margin. At 50% contribution margin, break even is 2x. At 25% it is 4x, and at 20% it is 5x, so the same 4x result can be excellent, break even or loss making depending on the store.

How do I calculate break even ROAS?

Divide 1 by your contribution margin. Contribution is revenue excluding VAT minus product cost, payment fees, packaging, fulfilment, delivery subsidy and expected returns, and contribution margin is that figure divided by net revenue. A 45% contribution margin gives a break even of about 2.22x.

Is 4x ROAS good?

It depends entirely on margin. At 50% contribution margin, 4x is double your break even and comfortable. At 25% it is exactly break even, so the advertising pays for itself and nothing else. At 20% it is below break even, and the campaign loses money on every order.

Should ROAS be calculated on revenue including or excluding VAT?

Calculate your contribution on revenue excluding VAT, because the VAT is collected for HMRC and never belongs to you. Google Ads usually receives the checkout value, which for a UK standard rated sale includes VAT, so set the target percentage on the basis Google actually reports or you will aim 20% too low.

What is the difference between ROAS and POAS?

ROAS compares attributed revenue with ad spend, while POAS attempts to compare profit with ad spend. POAS is only meaningful if everyone agrees which profit is meant, because gross profit, contribution and net profit are very different numbers.

Why do Shopify and Google Ads show different ROAS?

Because they measure different things. They use different attribution models and conversion windows, Google reports conversions against the date of the ad click rather than the order date by default, Shopify marketing reports can include tax and shipping, and returns often happen after the conversion is recorded.

How do I set a Target ROAS in Google Ads?

Start from break even, then raise it enough to leave the contribution you need for fixed costs and profit. Enter it as a percentage, check whether Google is receiving VAT inclusive or ex VAT values first, and remember that a target set too high can limit traffic.

How quickly can ROAS improve once an account is fixed?

Bidding reacts at once but needs one to two conversion cycles to settle on a new target, so judge changes over weeks rather than days. Across the accounts we manage, cost per acquisition falls by an average of 45% in the first 90 days. When we audit a new client's advertising, an average of 30% of spend is wasted, which is why an audit usually comes before a new target.

Final Thoughts

The question is not what a good ROAS is. It is what your break even is, how much contribution you need to keep, and whether the products generating your revenue are the ones you want to scale. Once those are answered, the target is arithmetic.

Work it out for your own catalogue, set the target on the same basis Google reports, and revisit it when costs change. If you would like a second pair of eyes on the numbers, ask for a free Google Ads account review.

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