How to Calculate ROAS

ROAS formula

ROAS is a ratio of revenue to ad spend, not of profit to ad spend. A 4.0x ROAS means the campaign returned $4 of revenue for every $1 spent on advertising. Run your own figures with the ROAS Calculator.

Worked example

A campaign spends $5,000 on ads and generates $20,000 in attributed revenue.

For every $1 of ad spend, the campaign produced $4 of revenue. A larger campaign with $15,000 of spend and $45,000 of revenue has a ROAS of 3.0x — lower, but on more volume, which is why ROAS should be read alongside scale and margin, not in isolation.

ROAS as a multiple and a percentage

The multiple and the percentage describe the same ratio. A 4x ROAS is the same as 400%: both mean revenue is four times the ad spend. The multiple (4x) is common in ad dashboards because it reads as “dollars of revenue per dollar of spend”; the percentage (400%) is common in finance reporting. Use whichever your audience expects, but do not add them together or treat them as different metrics.

Revenue is not profit

ROAS divides revenue by ad spend and ignores everything else, so a campaign can show a healthy ROAS while losing money on every order. The costs ROAS does not see include the cost of goods sold, fulfillment, agency fees, software, discounts, returns and overhead. A 4x ROAS at a 25% margin leaves $1 of gross profit per $1 of revenue, which may or may not cover the $1 of ad spend and other costs.

This is why ROAS must be read alongside margin. To find the minimum ROAS your costs require, use the Break-Even ROAS Calculator; to plan the ROAS needed for a target profit, use the Target ROAS Calculator.

How ROAS relates to break-even

Break-even ROAS is the minimum ROAS your margin can sustain before advertising becomes a loss. Below it, each sale costs more than it earns. If your actual ROAS sits above your break-even ROAS, advertising contributes positively before overhead; if it sits below, each scaled order destroys contribution. For the full evaluation, read what a good ROAS means for your business and ROI vs ROAS.

Common mistakes

• Treating ROAS as profit. ROAS is a revenue ratio; profit is what remains after every cost. A strong ROAS can still lose money.
• Comparing ROAS across different attribution windows. A seven-day figure from one platform and a thirty-day figure from another are not comparable. Fix the window first.
• Reading ROAS without margin. The same ROAS can be profitable at a high margin and loss-making at a low one. Always pair the two.
• Chasing a high ROAS at the expense of scale. Capping spend to protect ROAS can shrink the campaign below a useful size. Balance ROAS against volume and contribution.

To understand the media cost side of the equation, see the CPC Calculator and the CPM Calculator.