The short answer
ROAS = revenue from ads ÷ ad spend. $25,000 revenue from $5,000 spend is a 5x ROAS (or 500%). Whether that's good depends on margin: at a 40% gross margin you break even at 2.5x, so 5x leaves healthy profit. At a 15% margin you'd need 6.7x just to break even.
How to calculate ROAS
Divide the revenue your ads generated by what you spent on them. If you spent $2,000 and the ads brought in $9,000 in sales, your ROAS is 4.5x, often written as 450%.
Use revenue excluding VAT or sales tax, and ideally after refunds and returns. Platform-reported revenue tends to be generous, so check it against your store or CRM from time to time.
What's a good ROAS?
It depends on your margin. Here's the ROAS you need just to break even at different gross margins.
| Gross margin | Break-even ROAS | Target for 10% profit |
|---|---|---|
| 20% | 5.0x | 10.0x |
| 30% | 3.3x | 5.0x |
| 40% | 2.5x | 3.3x |
| 50% | 2.0x | 2.5x |
| 70% | 1.4x | 1.7x |
The target column keeps 10% of revenue as profit after ad spend: 1 ÷ (margin - 10%). Businesses with strong repeat purchases can often run lower ROAS on first orders. Work out yours with the break-even ROAS calculator.
ROAS vs ROI
ROAS only looks at revenue and ad spend. ROI looks at profit after all costs: product costs, management fees, tools. A campaign can have a 4x ROAS and still lose money once everything's counted. For the full picture, use our PPC ROI calculator.