How to Calculate ROAS (Return on Ad Spend)
Short answer: ROAS = revenue from ads ÷ ad spend. Spend $500, generate $2,000 in revenue = ROAS of 4× (or 400%). Most platforms calculate it for you, but knowing the formula lets you set targets, spot problems, and forecast profit.
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The ROAS formula
- ROAS = ad revenue ÷ ad spend
- Expressed as a multiple: $2,000 ÷ $500 = 4×
- Expressed as a percentage: 4× = 400% ROAS
- To find revenue from ROAS: Revenue = ROAS × ad spend
- To find spend from ROAS: Spend = revenue ÷ ROAS
Both notations are correct; “4×” and “400%” mean the same thing. Google Ads reports ROAS as a percentage; most ecommerce teams talk in multiples. See what is ROAS for a conceptual overview.
Worked example
- Ad spend this month: $1,200
- Revenue attributed to ads: $5,400
- ROAS = $5,400 ÷ $1,200 = 4.5×
To check profitability, you need one more number: your gross margin. If margin is 35%, gross profit = $5,400 × 0.35 = $1,890. Subtract ad spend of $1,200 and your net from ads = $690.
How to calculate break-even ROAS
Break-even ROAS is the minimum ROAS where you cover the cost of goods sold (but have nothing left for overhead or profit):
- Break-even ROAS = 1 ÷ gross margin
- 30% margin: break-even = 1 ÷ 0.30 = 3.33×
- 40% margin: break-even = 1 ÷ 0.40 = 2.5×
- 50% margin: break-even = 1 ÷ 0.50 = 2.0×
Your target ROAS should be above break-even — high enough to cover overhead and hit your profit goals. See what is a good ROAS for how to set the right target for your business.
ROAS vs CPA: which should you use?
Both measure campaign efficiency, but from different angles:
- ROAS works best when order values vary (ecommerce), because it scales with revenue
- CPA works best when conversions have a fixed value (lead gen, SaaS sign-ups)
- You can convert between them: CPA = AOV ÷ ROAS. If AOV = $80 and target ROAS = 4×, target CPA = $20
See what is CPA and ROAS vs MER for the full picture.
ROAS vs MER (Marketing Efficiency Ratio)
Platform ROAS (what Google and Meta report) counts only the revenue they can attribute to their own ads. MER (Marketing Efficiency Ratio) = total revenue ÷ total ad spend across all channels, giving a blended, attribution-free view of efficiency. For multi-channel businesses, MER is often more reliable than any single-channel ROAS. See ROAS vs MER.
Using the ROAS calculator
To calculate ROAS, break-even ROAS, and projected profit simultaneously, use our ROAS / MER calculator. Enter your spend, revenue, and margin to get your complete profitability picture in seconds.
Common mistakes
- Using platform ROAS without checking attribution. Google Ads and Meta use different attribution windows. The same sale can appear in both platforms’ ROAS numbers, inflating both. Use MER or blended ROAS for a cleaner view.
- Optimising for ROAS without knowing break-even. A 3× ROAS sounds good, but if your margin is 25%, break-even is 4× and you’re losing money on every order.
- Setting the same ROAS target across all campaigns. Retargeting campaigns naturally produce higher ROAS than prospecting. Use blended ROAS to set portfolio-level targets rather than punishing top-of-funnel campaigns for low individual ROAS.
FAQ
Is 4× ROAS good?
For a business with 30–40% gross margins, 4× ROAS is above break-even and generally profitable. But the right answer depends on your margin, overhead, and LTV. See what is a good ROAS.
What does 200% ROAS mean?
200% ROAS = 2× ROAS. You got back $2 for every $1 spent. For most businesses with costs above 50%, this is below break-even.
How do I improve ROAS?
Increase average order value (bundles, upsells), improve conversion rate, reduce CPC, tighten audience targeting, or shift budget to higher-performing campaigns. Use the ROAS calculator to model the impact.