Is Your ROAS Actually Profitable? How to Work Out Break-Even ROAS for an Indian Business

"Our ROAS is 4x" is one of the most common things a business owner says about their ads, usually with some pride. Sometimes it should be. But ROAS on its own doesn't tell you whether the ads made money. That depends on what was left after GST, the product, delivery, payment fees and returns. For many Indian businesses, those costs take a far bigger share of each sale than they realise.

This guide shows how to work out your break-even ROAS: the point below which every order from an ad loses you money. We'll do it step by step with a worked rupee example you can copy with your own numbers.

#ROAS and break-even ROAS, in one minute

ROAS (return on ad spend) is the revenue an ad platform credits to your ads, divided by what you spent:

ROAS = revenue credited to ads ÷ ad spend

Spend ₹10,000 on Meta, see ₹40,000 of purchases credited to it, and your ROAS is 4x.

Break-even ROAS is the ROAS at which the profit from those ad-driven orders is exactly zero. Above it, the ads make money. Below it, you are paying to sell. It comes from one comparison per order:

Break-even ROAS = revenue the platform credits per order ÷ what you keep from that order before ad spend

What you keep from an order before ad spend is called its contribution. Everything in this guide is about working out that number honestly.

#A worked example, step by step

Take an online store selling a product at ₹1,180, including 18% GST. These are example numbers. Replace each one with your own.

#Step 1: Take GST out of the price

GST collected on a sale isn't your money. It goes to the government.

₹1,180 ÷ 1.18 = ₹1,000 revenue to the business

#Step 2: Subtract every cost that comes with the order

Contribution = ₹1,000 − ₹524 = ₹476 per order

So the business keeps 47.6% of its GST-free revenue before paying for ads.

#Step 3: Compare with what the ad platform reports

If your website sends the full order total to Meta or Google, the platform credits ₹1,180 to the ad for this order, GST included.

Break-even ROAS = ₹1,180 ÷ ₹476 = 2.48x

Below 2.48x as reported by the platform, this store loses money on every ad-driven order.

#Step 4: Account for COD returns

Many Indian online orders are cash on delivery, and some come back undelivered: the customer refuses the parcel or can't be reached. This is called RTO, return to origin. The platform still counted those orders when they were placed.

Say 6 of every 100 orders come back (again, use your own rate). Each one earns nothing and costs delivery both ways plus packaging: ₹70 + ₹70 + ₹30 = ₹170, assuming the product returns in a sellable condition.

Break-even ROAS = ₹1,18,000 ÷ ₹43,724 = 2.70x

The break-even has moved from 2.48x to 2.70x, and this store's return rate is modest.

#Step 5: See what that means in rupees

Using the real contribution (₹437 per reported order), here is what ₹1,00,000 of ad spend does at two different ROAS levels:

A 2.5x ROAS looks perfectly respectable in an ad dashboard. For this business, it loses about ₹7,400 for every lakh spent.

#The margin table: what ROAS your margin needs

If you know roughly what share of GST-free revenue you keep from each order before ads, this table gives your break-even ROAS. The right-hand column is for when the platform's revenue includes 18% GST.

This is why one business celebrates a 3x ROAS while another loses money at 4x. The ads can perform identically; the margins don't.

#From break-even to a target

Break-even means the ads paid for themselves and nothing else. Rent, salaries, software and your own time still need paying out of what's left. So set a target above break-even, by the profit you want each order to leave behind.

Target ROAS = revenue the platform credits per order ÷ (contribution per order − profit you want per order)

In our example, if the store wants each order to leave ₹150 towards fixed costs and profit:

Target ROAS = ₹1,180 ÷ (₹437 − ₹150) = 4.11x

That 4.11x, not someone else's idea of a "good ROAS", is the number to judge campaigns by. Google Ads lets you bid towards a ROAS goal directly with Target ROAS bidding, and the same number works as a stop-or-scale rule on Meta.

#If you sell through enquiries, not a cart

Clinics, schools, real estate, B2B suppliers and many service businesses don't take payment online. The same logic works with cost per lead.

1. Work out the contribution from a new customer: their first purchase or treatment, minus the direct costs of delivering it.
2. Find your close rate: out of every 10 enquiries, how many become customers?
3. Multiply them.

Maximum cost per lead = contribution per new customer × close rate

For example, if a clinic's new patient brings ₹2,500 of contribution and 1 in 5 enquiries books (a 20% close rate), the clinic can pay up to ₹500 per lead before losing money. To keep half the contribution as profit, the target is ₹250 per lead.

Notice the lever this reveals: answering enquiries faster and better raises the close rate, which raises what every lead is worth. Sometimes the cheapest way to improve your ads is to improve how the phone gets answered.

#What about customers who come back?

Everything above judges each first order on its own. If customers reliably buy again, a first order that only breaks even can still be worth winning, because the profit arrives on the second and third purchase.

But count that only when your own records show it. "Customers usually come back" is a hope. "This share of last quarter's new customers ordered again within 90 days", with the share taken from your own orders, is a number you can plan with. Building that repeat business is the subject of our WhatsApp follow-up plan for local businesses.

#Why the dashboard and the bank don't agree

Even with the right break-even, compare it against the right ROAS:

• Attribution windows. Meta credits a sale to an ad according to your attribution setting, commonly a purchase within 7 days of a click or 1 day of a view. A wider window credits more sales and reports a higher ROAS.
• Timing. Platforms count an order when it's placed, before cancellations, returns and COD refusals.
• Double counting. If Google and Meta both touched the same customer, both may claim the sale.

So once a month, check the platform's view against your own: total ad spend against total contribution from the orders you actually delivered and kept.

#Your checklist

1. Take a typical order and write down what the customer pays.
2. Remove GST.
3. Subtract product cost, packaging, delivery, payment fees and the average discount.
4. Adjust for returns and undelivered COD orders, using your own rate.
5. Divide the platform-reported revenue per order by that contribution: that's your break-even ROAS.
6. Decide the profit you want per order: that gives your target ROAS.
7. Judge every campaign against the target, and recalculate whenever your prices, costs or return rate change.

#Where we come in

"Let's check the maths first" is how we start every advertising conversation at Click Again, before a single rupee is spent. Our performance marketing work begins with your break-even and target numbers, sets up tracking that reports the right revenue, and moves budget towards the campaigns that clear the target.

If you are about to hire someone to run your ads, the questions in how to choose a marketing agency in Madurai will help. And if you'd like us to work out your break-even with you, tell us about your business.