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What this ROAS calculator does
ROAS, or return on ad spend, tells you how much revenue each unit of ad spend brought in. Enter your revenue from ads and your ad spend, and the calculator returns your ROAS as a multiple, such as 4.2x, and as a percentage, such as 420%. Add your gross margin and it also returns your break-even ROAS: the lowest ROAS at which your ads stop losing money on the product cost of the sales they bring. It works for one campaign, one channel or the whole store, as long as revenue and spend cover the same period.
How ROAS and break-even ROAS are calculated
ROAS is revenue from ads divided by ad spend. If ads brought 4,000 in revenue and cost 1,000, the ROAS is 4.0x. Break-even ROAS is 1 divided by your gross margin. With a 40% margin, break-even ROAS is 1 divided by 0.40, which is 2.5x. At 2.5x, the gross profit on the sales just covers the ad spend, before fixed costs such as salaries, software and rent.
How to read the result
Compare the two numbers. If your ROAS is above your break-even ROAS, each sale from ads leaves a gross profit after paying for the ad. If it is below, the ads lose money on every sale, even when the ROAS looks healthy. A 3x ROAS is comfortable for a 50% margin and a loss for a 25% margin.
Two cautions. Platform ROAS is what Meta or Google reports, and it can claim more revenue than the store actually received, which is why we compare it to real revenue in our guide to real ROAS vs reported ROAS. And ROAS ignores returns, shipping, payment fees and discounts unless you subtract them first, so use revenue after returns and a gross margin that already includes those costs.
Questions we get
What is a good ROAS?
A good ROAS is one above your break-even ROAS. Break-even is 1 divided by your gross margin, so a 50% margin needs a ROAS of 2 and a 25% margin needs 4. No single number is good for every store, because the right target depends on your margin and your fixed costs.
How do I calculate break-even ROAS?
Break-even ROAS is 1 divided by your gross margin. With a 40% margin, you need a ROAS of 2.5 to cover the product cost of the sales your ads bring. Below that, every sale from ads loses money before fixed costs. Use the calculator above with your own margin.
What is the difference between ROAS and ROI?
ROAS divides revenue by ad spend and ignores what the product cost. ROI looks at profit: it subtracts product, shipping and other costs before comparing the result with spend. A campaign can show a 4x ROAS and still have a low or negative ROI if the margin is thin.
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Fit check
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Every Preneuriat client gets a live dashboard: store revenue, all media spend, real ROAS, updated all day. The first call goes both ways.
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