How to calculate break-even ROAS for a dropshipping product
Work out the most you can spend on ads per sale before a dropshipping product loses money, using supplier cost, shipping, and fees.
Start with contribution per order
Take the price the customer pays, then subtract supplier cost, shipping, payment processing fees, and any platform fee. What is left is the contribution per order: the money available to pay for advertising and profit.
Example: a $39.99 sale with a $12 supplier cost, $6 shipping, and about $1.46 in card fees (2.9% plus 30 cents is a common US card rate) leaves roughly $20.53 before ads.
Turn it into break-even ROAS
Break-even ROAS is the sale price divided by the contribution per order. In the example, $39.99 / $20.53 is about 1.95. If your ads return less than $1.95 in revenue for every $1 spent, each sale loses money.
Your maximum cost per purchase is the contribution itself, about $20.53 here. Anything below that is profit; anything above is a loss.
Leave room for refunds and returns
Refunds, chargebacks, and replacement shipments come out of the same contribution. Set aside a percentage based on your supplier and category before you treat the margin as profit.
If the break-even ROAS is above 3, the product usually needs a higher price, a cheaper supplier, or a bundle before it is worth testing with paid traffic.
Questions
What is a good break-even ROAS for dropshipping?
Lower is safer. A break-even ROAS under 2 leaves more room for testing creative and audiences. There is no universal target, because it depends on your own cost, shipping, and fees.
Does Dropship Scout calculate fees for me?
Yes. Before a listing can be published, the price must cover supplier cost, shipping, an estimated card fee, and the platform fee. The idea checker helps you sanity-check a product before you quote it.
Should I include ad spend in the product price?
Price for the market first, then check the numbers. If the contribution per order cannot cover a realistic cost per purchase, the product is not ready for paid ads.