How do you calculate ROAS?
ROAS (return on ad spend) is the revenue your ads brought in divided by what you spent on them. $8,000 of sales from $2,000 of ads is a ROAS of 4, written as 4×, 4:1 or 400%. It tells you how much revenue each ad dollar returned, but not whether you made a profit: for that you need your margin.
| Ad spend | Revenue from ads | ROAS |
|---|---|---|
| $1,000 | $2,000 | 2× (200%) |
| $2,000 | $8,000 | 4× (400%) |
| $5,000 | $12,500 | 2.5× (250%) |
Take the spend and revenue from the same campaigns over the same dates. Most ad platforms report conversion value for you; if you track sales in your own analytics, use the revenue attributed to paid traffic.
Is my ROAS profitable?
Only if it's above your break-even ROAS, which is 1 divided by your gross margin. At a 40% margin, break-even is 1 ÷ 0.40 = 2.5×. Below that, the ads cost more than the orders they bring in leave you. Add your margin in the calculator above and it shows the profit or loss after ad spend.
| Gross margin | Break-even ROAS |
|---|---|
| 60% | 1.67× |
| 50% | 2× |
| 40% | 2.5× |
| 30% | 3.33× |
| 20% | 5× |
That's why there's no universal "good ROAS". What is a good ROAS? works through examples for an online store and a dropshipping product, and the break-even ROAS calculator builds your margin from product cost, shipping, payment fees and refunds instead of a single percentage.
ROAS vs ROI: what's the difference?
ROAS compares revenue with ad spend. ROI compares profit with cost. In the calculator's default example, $2,000 of ads brings in $8,000 of sales: a 4× ROAS. At a 40% margin those sales leave $3,200 of gross profit, so the ads made $1,200 after their own cost, a 60% return on the ad spend. ROAS is the quicker number to track day to day; ROI is the one that tells you whether to keep spending.
How do you improve ROAS?
- Raise conversion rate. A faster, clearer landing page turns more of the same clicks into sales. The site speed audit checks how quickly yours loads.
- Raise order value. Bundles and free-shipping thresholds increase revenue per conversion without extra ad spend.
- Cut wasted spend. Pause campaigns and audiences running below break-even and move budget to the ones above it.
- Fix tracking. Missing conversions make ROAS look worse than it is, and duplicated ones make it look better.
To plan a budget before you spend, the Google Ads cost calculator and Facebook ads budget calculator estimate the clicks and conversions a budget buys.