Calculate your Shopify ROAS target

ROAS is revenue divided by ad spend. It does not subtract product costs, delivery costs or overhead. A high ROAS can still leave too little money to run the store.

Use net sales after discounts and refunds, on a consistent basis that excludes collected sales tax. Subtract product cost and order-level costs such as payment fees, shipping you fund and fulfillment. Do not subtract ad spend or fixed costs yet.

Pre-ad contribution margin = (net sales − variable order costs) ÷ net sales. Enter 35 in the calculator for a 35% margin. A fixed monthly software bill belongs in fixed costs; a per-order fee belongs in variable costs. Do not count it twice.

Shopify's profit reports are a starting point, not a substitute for this cost check. Missing product costs and differences between report definitions can change what the margin represents.

At a 35% pre-ad contribution margin, break-even ROAS before fixed costs is 1 ÷ 0.35 = 2.86×, rounded. At that exact break-even point, all contribution pays for ads. Nothing remains for rent, salaries or profit.

For fixed-cost coverage, use:

Illustrative inputs, not a client result. Exactly $12,000 remains for the chosen fixed-cost share. There is no profit left after paying that share. To include a profit goal, add that amount to the coverage requirement before calculating.

More spend only produces this result if ROAS and margin hold. They can fall as spend rises. Model several outcomes before committing cash.

Use a measured customer cohort and a named time window, such as 12 months. Repeat purchases take time and may need more advertising, discounts or support.

For illustration, assume an $80 net value on every order, 30% of new customers returning, and 2.5 additional orders per returning customer within 12 months. Expected revenue per acquired customer is $80 × (1 + 0.30 × 2.5) = $140. At a constant 35% pre-ad contribution margin, that leaves $49 before acquisition cost and fixed costs.

A $49 acquisition cost consumes all $49. It leaves $0 for fixed costs. The implied first-order ROAS of $80 ÷ $49 = 1.63× is a cohort break-even illustration, not a profitable target or a promise of fast payback.

If 2.5 means total orders including the first purchase, use 1.5 additional orders instead. The model becomes $116 revenue and $40.60 pre-ad contribution per acquired customer. Mixing these definitions overstates what you can afford.

• No positive contribution margin: no finite positive ROAS covers both variable costs and ad spend under this model.
• ROAS × margin is 1: contribution after ads is zero. It cannot cover positive fixed costs.
• ROAS × margin is below 1: more spend increases the modelled loss before fixed costs.
• No ad spend: ROAS is undefined. Zero revenue with positive ad spend gives 0× ROAS. If net sales are zero, the contribution-margin ratio is undefined. Check the underlying totals before using the calculator.
• Different product margins: use the margin of the actual product mix, not the best-selling product alone.

Do not choose a universal “growth” target of 1 to 1.5× or a “cash-flow” target of 3 to 4×. Set the target from the costs, payback window and risk the business can carry. Pausing or reducing spend can be appropriate when losses or cash needs breach your limits.

A Google Ads Target ROAS setting uses the conversion values recorded in that account. Check what those values contain before comparing them with net sales in this model. Google explains Target ROAS and conversion-value requirements here.

Is 4× ROAS profitable?

Not always. At 35% pre-ad contribution margin, 4× ROAS leaves $0.40 per $1 of ad spend before fixed costs. Whether that covers overhead and profit depends on their amount and the volume sold.

Can lifetime value pay this month's bills?

Future repeat orders are not current cash. Keep a same-period cash model separate from a measured cohort model, and include the costs of earning those later orders.

Why does the calculator show no positive solution?

At the selected ROAS and margin, ads leave zero or negative contribution. Increasing spend cannot cover a positive fixed-cost requirement while those assumptions stay unchanged.