Break-even ROAS is the ROAS at which your ads make exactly zero profit. Without returns it is 1 ÷ your margin, so a 33% margin breaks even at 3x. For COD brands, work on 100 booked orders: subtract product, packing, courier both ways and COD fees from the cash you collect, and that is the most you can spend on ads.
- Simple formula: break-even ROAS = 1 ÷ margin. A brand celebrating 3x ROAS on a 33% margin is making nothing.
- COD brands must include returns: you still pay packing and courier on parcels that come back.
- Worked example: AOV Rs 1,500, 40% product cost, 20% returns gives a break-even CPA of Rs 574 and a break-even of 2.62x as Meta shows it.
- Lower returns raise the most you can pay per order, which lets you outbid competitors for the same customers.
- Target a CPA about 30% below break-even so there is profit left.
“What ROAS should we target?” is the first question every brand owner asks us. The honest answer: your own numbers decide it, not us and not a blog post. This guide shows you how to work it out in five minutes, and there’s a calculator below that does it for you.
The short version
Break-even ROAS is the ROAS at which your ads make exactly zero. Below it, every order you buy loses money. Above it, you’re profitable.
For a simple business with no returns, it’s:
Break-even ROAS = 1 ÷ your margin
So if 33% of each sale is left after product and delivery costs, your break-even ROAS is 1 ÷ 0.33 = 3.0x. A brand celebrating “3x ROAS” might be making nothing at all.
For COD brands in Pakistan that formula isn’t enough, because returned parcels still cost you money. You need to work on a batch of orders.
The COD version: work on 100 orders
It’s easier with a batch of 100 booked orders. You need four numbers to start:
- Average order value (AOV): from Shopify → Analytics
- Product cost as a % of price: you know this
- RTO: what share of COD orders comes back (use 20%, the Pakistan average, if you don’t know yet)
- Courier rates: from your courier’s rate card
Worked example
AOV Rs 1,500, product cost 40%, 20% returns, all COD, Rs 200 delivery charged to the customer. Packaging Rs 60, courier Rs 180 out and Rs 140 back, COD fee 1.5%, and 15% of returned stock can’t be resold.
Of 100 orders booked, 80 are delivered and 20 come back.
CASH IN 80 delivered × (Rs 1,500 + Rs 200) = Rs 136,000
COSTS BEFORE ADS
Product on delivered orders 80 × Rs 600 = Rs 48,000
Damaged returned stock 20 × Rs 600 × 15% = Rs 1,800
Packaging, all 100 parcels 100 × Rs 60 = Rs 6,000
Courier out, all 100 100 × Rs 180 = Rs 18,000
Courier back, 20 returns 20 × Rs 140 = Rs 2,800
COD fee Rs 136,000 × 1.5% = Rs 2,040
──────────
Total before ads = Rs 78,640
LEFT FOR ADS AND PROFIT 136,000 − 78,640 = Rs 57,360
That last number is everything. Your targets fall straight out of it:
Most you can pay per order (break-even CPA) = 57,360 ÷ 100 = Rs 574
Target CPA (keep 30% as profit) = 574 × 0.70 = Rs 402
Break-even ROAS on delivered orders = (80 × 1,500) ÷ 57,360 = 2.09x
Break-even ROAS as Meta shows it = (100 × 1,500) ÷ 57,360 = 2.62x
So for this brand, anything under 2.62x on Ads Manager is losing money, and a cost per order above Rs 574 is losing money too.
Try it with your numbers
Change the numbers below. The “Courier, packaging and payment costs” section opens up the rest of the inputs.
Why lower returns let you outbid competitors
Run the same example at 12% returns instead of 20%:
| RTO 20% | RTO 12% | |
|---|---|---|
| Most you can pay per order | Rs 574 | Rs 678 |
| Break-even delivered ROAS | 2.09x | 1.95x |
Cutting returns from 20% to 12% doesn’t just save money. It means you can pay 18% more for every order and still be profitable. In a Meta auction, that’s the difference between winning the buyer and losing them to a competitor who can’t work out how you afford it.
That’s why we fix returns and margin before pushing ad spend. Ads multiply whatever is underneath them, losses included.
Common mistakes
- Using Meta’s ROAS against a delivered break-even. Compare like with like: Meta ROAS with the “as Meta shows it” number, delivered ROAS with the delivered one.
- Forgetting the courier on returns. You pay it twice on every returned parcel.
- Using gross margin from your supplier invoice. Packaging, delivery and COD fees come out of every order too.
- Setting one target forever. When your RTO, AOV or courier rates change, your break-even changes. Recalculate monthly.
What “profit” means here
These numbers are contribution margin: what each order leaves after every cost of making and delivering it, including ads. They don’t include salaries, rent or software. Those come out of the contribution margin, which is why it needs to be comfortably positive, not just above zero.
If you’d like us to run this on your real courier data instead of estimates, that’s exactly what our free profit-leak check does.
Frequently asked questions
What is a good ROAS for COD in Pakistan?
There is no universal number. It depends on your margin, order value and return rate. Work out your own break-even ROAS first; anything above it makes money and anything below it loses money.
How do I calculate break-even ROAS?
For a business without returns, divide 1 by your margin (for example 1 ÷ 0.33 = 3.0x). For COD, take 100 booked orders, subtract every cost before ads from the cash collected on delivered orders, and divide booked revenue by what is left.
What is break-even CPA?
Break-even CPA is the most you can pay in ads for one booked order before you start losing money. For COD it is the money left after product, packing, courier and COD fees, divided by the number of orders booked.
Why does my ROAS look good but I'm not making money?
Usually because Meta's ROAS counts booked orders, including returns, while your costs include courier both ways on every parcel. Compare your ROAS with your COD break-even ROAS, not with a rule of thumb.
Find out where your money is leaking
Send us your brand and we'll record a short video on your own ad account: what Meta over-counts, where returns cost you, and the first thing we'd fix. Free, with view-only access.