Why a good ROAS can still lose money
ROAS compares attributed revenue with ad spend, but it leaves out the costs that decide whether an order was profitable.
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ROAS is useful for comparing campaign revenue with advertising spend. It is not a profit metric. Product cost, shipping, payment fees, refunds, and fulfillment all sit outside the basic ratio.
Start with contribution before ads
Subtract the costs that vary with an order from net sales. The amount left before advertising is the contribution available to pay for acquisition and still leave profit.
Estimate break-even ROAS from contribution margin
Break-even ROAS is the reciprocal of pre-ad contribution margin. If your pre-ad contribution margin is 40%, the break-even ROAS is 2.5. Treat it as a scenario estimate, use your actual costs and rates, and remember that fixed overhead still needs to be paid.