ROAS calculator

ROAS is revenue divided by spend. If ads brought in 20,000 dollars of orders and cost 5,000 dollars, the ROAS is 4.0, written here as 4.0x. The second number takes the same revenue, keeps only the gross margin share of it, and then subtracts the spend. With a 40 percent margin, 20,000 dollars of revenue is 8,000 dollars of gross profit, and after 5,000 dollars of ads there is 3,000 dollars left. That second figure is the one that pays your salaries, so treat it as the real result and the multiple as a shortcut.

A high multiple with a negative profit figure means your margin cannot support the spend, however good the ads look. A modest multiple with a healthy profit figure means the product carries enough margin that you can afford to buy growth. Compare the multiple against your break-even ROAS, which is 100 divided by your margin percentage, rather than against a figure someone quoted for another store. If the profit line is close to zero, the campaign is buying customers at cost, which can be fine if those customers come back and buy again.

ROAS is mostly a visitors-lever number. It tells you what each dollar of paid traffic returned this period. The other three levers change it without any change to the ads. Raise conversion rate and the same clicks produce more orders. Raise average order value and the same orders produce more revenue. Raise repeat purchases and the true return arrives months after the click, which no campaign report will show you. When ROAS is falling, check whether the site or the offer changed before you blame the campaign.