A campaign can report 4× ROAS and still leave an ecommerce store short of cash. The ad platform sees the sale. The owner pays for the product, packaging, delivery, fees and the orders that never make it home. Before deciding whether to increase the budget, work out the ROAS your own margins require.
This guide shows the break-even ROAS formula with an illustrative example in Pakistani rupees. It is a way to set a floor for a product or campaign, not a claim about what every store in Pakistan should achieve.
ROAS and break-even ROAS are different numbers
ROAS = attributed sales revenue ÷ advertising spend. If an ad platform attributes PKR 100,000 in sales to PKR 25,000 in spend, it reports 4× ROAS. Google Ads calls its comparable metric “conversion value per cost.” That ratio does not subtract the cost of fulfilling those orders.
Break-even ROAS = 1 ÷ contribution margin before advertising. Write the margin as a decimal. A 40% margin is 0.40, so the break-even ROAS is 1 ÷ 0.40 = 2.5×. At that level, the order covers the variable costs included in your calculation and its share of ad spend. Rent, salaries, tax and other fixed costs still need attention. If your margin is zero or negative, no finite ROAS can make the order viable on the same terms.
Find the margin that belongs in the formula
Start with the money actually kept from a fulfilled sale after discounts. Then subtract the costs that rise when you sell another order. Depending on your store, those may include product cost, packaging, the delivery amount your business pays, payment or cash-on-delivery charges, marketplace fees and an allowance for failed deliveries or return handling.
Use your own order records rather than a general ecommerce benchmark. If a customer pays a separate delivery charge, include the revenue and the related courier cost consistently. If a refund has already reduced your net sales figure, do not deduct that lost revenue a second time as a cost. Shopify’s sales reports distinguish gross sales, discounts and sales reversals for this reason.
Contribution before ads = net sales kept − variable order costs.
Contribution margin = contribution before ads ÷ net sales kept.
A PKR 5,000 order, worked through
Imagine one fulfilled order after any discount. The figures below are hypothetical. They are not CueMatrix client results or market averages.
| Order item | PKR |
|---|---|
| Sales revenue kept | 5,000 |
| Product cost | 2,400 |
| Packaging | 100 |
| Courier cost paid by the store | 300 |
| Payment or collection fee | 100 |
| Average failed delivery and return handling cost | 100 |
| Total variable costs | 3,000 |
| Contribution before ads | 2,000 |
PKR 2,000 ÷ PKR 5,000 = 40% contribution margin. The break-even ROAS is 1 ÷ 0.40 = 2.5×. You can afford at most PKR 2,000 of acquisition spend on this order before the listed variable costs consume the sale. That is a ceiling, not a sensible target for a business that also pays people and overhead.
At 4× ROAS, the implied ad spend for this PKR 5,000 order is PKR 1,250. PKR 2,000 contribution before ads minus PKR 1,250 ad spend leaves PKR 750 before fixed costs and tax. At 2.5×, that remainder is zero.
How much does a change in margin move the target?
| Contribution margin before ads | Break-even ROAS |
|---|---|
| 20% | 5× |
| 30% | 3.33× |
| 40% | 2.5× |
| 50% | 2× |
A discount, a higher courier bill or more failed deliveries can move a campaign from above the floor to below it without any change in the ad dashboard. Recalculate by product group and offer. A blended store average can hide an unprofitable product.
Why the ad dashboard and the order book disagree
Platform ROAS is based on the conversions and values sent to that platform. An order may later be cancelled or partly refunded. Google Ads supports conversion adjustments for returned and cancelled purchases, but those adjustments need to be set up. Even when tracking is accurate, attributed revenue is not the same thing as contribution profit.
Compare the dashboard with fulfilled orders, actual refunds, collected revenue and total ad spend over the same period. Keep the reporting window and attribution assumptions visible. If you advertise on more than one channel, review the store as a whole as well as each platform. Do not add attributed sales from two platforms together and assume that they represent distinct orders.
Put the number to work this week
- Choose a product or offer. Use its real selling price after discounts, not the price printed on a product page.
- List the variable costs. Include delivery and collection costs your business actually pays. Estimate failed delivery or return handling from your own recent orders.
- Calculate the floor. Divide contribution by net sales, then divide 1 by that margin. Work in the same currency throughout.
- Set a target above the floor. Leave room for fixed costs and the profit you need. Check how much customer acquisition cost the order can carry.
- Reconcile and repeat. Review fulfilled orders and refunds each week. Recalculate when a price, discount, delivery rate or product mix changes.
If a sale period is coming, use the same worksheet before announcing a discount. Our 11.11 planning guide covers that decision in more detail. If your reported ROAS has fallen, the October ecommerce review offers a way to investigate the customer journey before changing the budget.
Questions ecommerce owners ask
What is a good ROAS for ecommerce in Pakistan?
There is no single number. A 3× ROAS may be healthy for a high margin product and a loss for a low margin one. Start with your own contribution margin and required profit.
Should I include cash-on-delivery and return costs?
Yes, when your store bears them. Use your actual fee schedule and a measured allowance for failed delivery or return handling. Keep refunded revenue separate so you do not count the same loss twice.
Is a campaign profitable above break-even ROAS?
It has cleared the variable cost and ad spend included in this calculation. That does not prove the business has covered fixed overhead, tax or all acquisition costs. Check the full profit and loss statement before calling it profitable.
Need a clearer view of your numbers?
CueMatrix works with ecommerce brands on campaign measurement, creative and store decisions. If you want to review your acquisition cost and margins before spending more, see our performance marketing service and ecommerce growth service, or send us your brief.
Sources and method
The formulas above are arithmetic applied to the stated hypothetical example. The cited references explain the platform metrics and how sales records handle adjustments. No industry wide ROAS benchmark or client result is implied.
- Google Ads Help: Understand your conversion tracking data, for conversion value per cost.
- Google Ads Help: About conversion adjustments, for returns and cancellations.
- Shopify Help Center: Sales reports, for gross sales, discounts and sales reversals.
- Shopify: Target ROAS, for the reciprocal margin approach to break-even ROAS.
