Are you struggling with how to calculate your breakeven ROAS in Facebook Ads?

Don’t worry! I’ve got you covered. It’s an incredibly common challenge, and I’ve got a really effective way to apply this in your first few PPC campaigns.

What is Return on Ad Spend?

First, let’s confirm what Return on Ad Spend (ROAS) means. ROAS, in Facebook Ads, simply means: for every dollar that you spend, how many dollars do you make? For example, if your ROAS is 2.5, then for every one dollar you spend, you’ll make 2.5 back in revenue. Keep in mind, this is revenue and not profit. 

What is Breakeven ROAS and How Do You Measure It?

Now that we know what ROAS means, we can move onto breakeven ROAS. When we refer to breaking even, we are saying that we have generated as much money as we have spent and have recovered our losses — but we haven’t generated any profits. For example, you have spent $100 on Facebook Ads and generated $100 in revenue, leaving you with a balance of $0. Therefore, your breakeven ROAS represents the value where you have spent money on ads and you’ve recouped the costs from your sales, but you’ve made no additional profit.

In order to measure your breakeven ROAS, you’ll need just one metric to hand, which is your gross profit/net profit. For example, if you run an e-commerce store and sell sunglasses at $100 for a profit of $40, your gross profit is 40%. You would then simply take the number one and divided that by your gross profit.

For example: 1 divided by 40% is 2.5. Therefore your breakeven ROAS value is 2.5.

This means that any Campaign, Ad Set or Ad with a ROAS of less than 2.5 will be generating a loss for you or your client.

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How to Use Breakeven ROAS in Facebook Ads

Now let’s apply this rule practically within the Facebook Ads Manager. What we are going to do is create an automatic rule that will switch off any ad sets that are generating a return on ad spend that is below your breakeven value. We will also add a condition that will focus only on ads that you have spent a testing budget on. This will avoid ads being immediately switched off once you’ve spent only a few bucks; we’ll need to let the ads run before we make any automated decisions on what success looks like.

Within the Ads Manager, look for the button below the Campaigns, Ad Sets and Ads tabs, which is labelled ‘Rules’. It should have a handy downward arrow. See it? Once you’ve determined at what account tier you’d like to apply the rule, click on the button and then click Create a new rule from the dropdown list.

A window will pop up. Give your rule a clear, simple name that you’ll recognise, like: ‘Breakeven ROAS: Turn off Ad’ – this should allow you to quickly see what the rule is, and what it does when you next come to manage rules. For the next box, ‘Apply rule to’, you’ll need to decide whether you want this automation to switch off campaigns, ad sets or just ads.

I prefer to test a batch of creatives over a range of Ad Sets first, so I typically apply this rule to the Ad Set level. But feel free to apply it to whichever suits your needs.

For action, select ‘Turn off [section]”. This will automatically turn of either your campaign, ad sets or ads when the rule criteria are met.

Now the fun part: setting up the rule conditions. From the first box, look for ‘Website purchase ROAS’, then in the next box select ‘is smaller than’. Next, type your breakeven ROAS value into the white box and tap ‘Add’.

Next, we want to apply a minimum spend threshold; I typically test ad sets with a daily budget of £5 GBP for three days. So, I click the plus icon, look in the first dropdown list for ‘Spent’, then I set the next box to ‘is greater than’ and I type £15, which is my target spend for three days. At this point, I’d normally be reviewing my ads and so £15 is perfect for the automation to kick in.

I’ll then set the Time Range to Maximum, so that it will kick in if an existing ad set somehow begins to drop below our breakeven threshold. And finally, I leave the Schedule to run continuously. Now just hit ‘Create’ and you’re done! Voila!

Conclusion: Time to make profits with your Breakeven ROAS calculation

There we go! We’ve covered what Return on Ad Spend means, what your breakeven ROAS is and also we’ve provided a simple automation that will switch off any ad sets that are not meeting your profit-making threshold. The power of these automations is that it completely takes the emotion out of your campaigns, and ensures that only your profitable, winning ads are running.

Want to do further digging with these breakeven automation rules? There’s lots that can be done, like scheduling your automations to run at certain intervals or days of the week, or creating an advanced Time Range to always be monitoring your ads through the lens of a smaller time period — great for keeping on top of sudden changes in ad performance.

I hope you’ve found this useful! Let me know if you have any questions or challenges.