How do you calculate ROAS, and what is a good ROAS?
Quick answer
ROAS is the revenue your ads brought in divided by what the ads cost: $8,000 of sales from $2,000 of spend is a ROAS of 4, or 4x. A good ROAS is anything above your break-even ROAS, which is 1 divided by your gross margin. With a 40% margin, you need at least 2.5x just to cover the ads.
Last updated
Updated · By Robert Breen
The formula, step by step
- Take the revenue that came from ad clicks in the period, for example $8,000.
- Divide it by the ad spend for the same period, for example $2,000. ROAS = $8,000 / $2,000 = 4x.
- Work out break-even ROAS from your gross margin: 1 / 0.40 = 2.5x for a 40% margin.
- Compare the two. 4x is above 2.5x, so the ads make money on each sale before other costs.
Why "good" depends on your margin
| Gross margin | Break-even ROAS | A 3x ROAS is… |
|---|---|---|
| 70% | 1.4x | Comfortably profitable |
| 40% | 2.5x | Slightly profitable |
| 25% | 4x | Losing money on every sale |
The same 3x can be a success or a loss. That is why ROAS is only meaningful next to your margin, and why many teams also track CPA for products with one fixed price.
Common mistakes
Counting revenue the ads did not cause: retargeting often shows a high ROAS partly because it reaches people who were about to buy anyway. Adding up each platform’s own numbers: Google and Meta can both claim the same order, so compare their total with your store’s real sales.
Learn it step by step
Free beginner lessons with a worked example and a quick quiz.
- PPC Metrics Explained: CPC, CTR, CPA and ROAS With Examples (about 11 minutes)
Terms in this answer
Frequently asked questions
- Is ROAS the same as ROI?
- No. ROI uses profit and all costs. ROAS uses revenue and ad spend only, so a campaign can have a healthy ROAS and a negative ROI.
- What time period should I use?
- At least 30 days for most businesses, longer for products people think about before buying, so late purchases are counted.
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