What's a 'good' ROAS?

There's no universal good ROAS. It depends entirely on the product's actual margin. A break-even ROAS calculated from real costs is the only number that means anything for a specific brand.

How do I calculate break-even ROAS?

Start from the product's landed cost (cost of goods plus fulfillment), add payment processing fees, and factor in the brand's actual historical return rate. The ROAS needed just to cover those costs is the real floor, not zero.

Does this mean ROAS is a useless metric?

No, it's a useful metric when it's compared against the right break-even number for the specific product, not treated as a universal target the same for every brand and every product.

Should returns factor into how creative or campaigns get evaluated?

Yes, when the data is available. A high-converting ad driving a high-return-rate product can look like a win in Ads Manager and be a loss once the full picture is accounted for.

Guide

Your ROAS Looks Good But the Business Isn't Profitable

By Affan Siddiqi, Founder, Psycomaths

A Meta Ads account can report a strong ROAS and the business can still be losing money or barely breaking even. ROAS only measures revenue against ad spend, not the actual cost of goods, fulfillment, returns, and the other real expenses sitting underneath every sale. A brand optimizing purely for ROAS can scale spend into a number that looks great and a bank balance that doesn't move.

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ROAS doesn't know your margin

A 3x ROAS on a product with 70% margin is a very different business than a 3x ROAS on a product with 20% margin, and the ad platform has no way to tell the difference. Without a real break-even ROAS calculated from actual product cost, shipping, payment processing, and return rate, the number on the Ads Manager dashboard is close to meaningless as a profitability signal.

Acquisition-only optimization ignores the customers who already converted

A large share of ecommerce brands optimize entirely for new customer acquisition and treat every sale as a one-time event, when a meaningful share of long-term profitability comes from repeat purchases and customer lifetime value. Campaigns and creative built only to win the first sale, with no attention to what happens after, leave real margin on the table.

Return and refund rates quietly erase reported ROAS

A sale that gets refunded still shows up as a conversion in most standard ROAS reporting unless the account is specifically set up to account for it. A product or creative angle with a high return rate can report strong ROAS while actually losing money once refunds, return shipping, and restocking are factored in.

The fix is a real break-even number, not a bigger ROAS target

Calculating an actual break-even ROAS, specific to the product's real margin after cost of goods, shipping, processing fees, and expected return rate, turns ROAS from a vague "higher is better" number into a real decision-making tool. Scaling decisions, creative decisions, and even which products to advertise at all start to look different once that number exists.

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Psycomaths' Meta Ads management service runs and scales Facebook and Instagram ad accounts for Shopify and DTC ecommerce brands, combining campaign strategy, creative testing, and tracking diagnostics into one system instead of treating them as separate deliverables.

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