ROAS and break-even ROAS calculator

Four calculations in one tool

• ROAS: revenue ÷ ad spend.
• Break-even ROAS: price ÷ (price − cost of goods − shipping and fees).
• Target ROAS: 1 ÷ (margin before ads − the profit margin you want).
• ACoS: ad spend ÷ revenue × 100, which is 100 ÷ ROAS.

What is ROAS?

Return on ad spend is the revenue a campaign brings for each dollar spent on it. Google Ads calculates it as conversion value ÷ cost: $5 in sales for $1 of spend is a 500% ROAS. A ROAS of 5 and a ROAS of 500% mean the same thing.

ROAS counts revenue, not profit. A ROAS of 3 can lose money when the margin is thin, which is why the break-even ROAS matters more than the ROAS on its own.

How to calculate break-even ROAS

1. 1

   Take the price

   The average order value, or the price of the product you advertise.

2. 2

   Subtract what each sale costs you

   Cost of goods, shipping and payment fees. What is left is your margin before ads.

3. 3

   Divide the price by that margin

   $80 − $32 − $12 = $36, a 45% margin. $80 ÷ $36 = a break-even ROAS of 2.22.

In Excel or Google Sheets

With revenue in A2 and ad spend in B2, ROAS is =A2/B2. With the price in A2, cost of goods in B2 and shipping and fees in C2, break-even ROAS is =A2/(A2-B2-C2).

What ROAS should you target?

Break-even covers the ads and nothing more. To keep a profit, divide 1 by your margin before ads minus the profit margin you want. At a 45% margin and a 15% profit target, the target ROAS is 1 ÷ 0.30 = 3.33.

Is a 2.5 ROAS good?

It depends on the margin. At a 45% margin, break-even is 2.22, so 2.5 leaves a small profit. At a 30% margin, break-even is 3.33, and 2.5 loses money on every sale.

ROAS for lead generation and B2B

When ads bring leads rather than orders, the revenue arrives months later, in the CRM. Use won revenue from the deals a campaign sourced, for a group of leads old enough to have closed. As an early signal, pipeline ROAS divides the value of open opportunities by ad spend. Count each deal once, even when several channels claim it.

ROAS vs ACoS

ACoS, advertising cost of sales, is Amazon’s name for the same relationship turned around: ad spend divided by sales. A 25% ACoS is a ROAS of 4.

ROAS questions

How do I calculate ROAS?

Divide the revenue from ads by what the ads cost. $12,000 from $3,000 of ads is a ROAS of 4, or 400%.

What ROAS is 25% ACoS?

A ROAS of 4. Divide 100 by the ACoS: 100 ÷ 25 = 4.

What is a good ROAS?

One above your break-even ROAS, with room for the profit you want. Work it out from your margin before ads, not from an average.

What is the difference between ROAS and ROI?

ROAS divides revenue by ad spend. ROI divides profit by the whole investment, including product costs and fees. A campaign can have a high ROAS and still lose money.