ROAS calculator

How it is worked out

• ROAS = revenue from ads divided by ad spend.
• Break-even ROAS = 1 divided by your margin before ads. At 40% it is 2.50.
• Profit after ads = revenue times margin, minus ad spend.

Example: a $40 desk organizer store

• Ads cost $4,000 and brought in $12,000: a ROAS of 3.00.
• At a 40% margin those sales leave $4,800 before ads.
• After the $4,000 of ads, $800 is left: a ROAS of 3.00 against a break-even of 2.50.
• At a ROAS of 2.00 the same store would lose $800, even though ads "return" $2 for every $1.

Questions

How do you calculate ROAS?

• ROAS = revenue from ads divided by ad spend.
• $12,000 in sales from $4,000 of ads is a ROAS of 3.00.

What is ROAS?

• Return on ad spend: revenue from ads divided by what you spent on them.
• A ROAS of 3 means $3 of sales for every $1 of ads.

What is a good ROAS?

• Any ROAS above your break-even ROAS, which depends on your margin.
• At a 40% margin you need 2.50 to break even. At a 25% margin you need 4.00.

Why can a ROAS above 1 still lose money?

• ROAS counts revenue, not profit. Product cost, shipping and fees come out first.
• A ROAS of 2.00 at a 40% margin loses 20 cents on every ad dollar.