How to use the ROAS calculator
- Enter the ad spend for one campaign, channel or month: what the platform actually charged.
- Enter the revenue attributed to those ads for the same period. Use the same attribution window you use elsewhere, because a longer window credits the ads with more sales.
- Enter your gross margin: the share of revenue left after the cost of the product, shipping, payment fees and expected returns. This is what turns revenue into profit.
- Optionally enter the profit margin you want after paying for ads. The calculator shows the ROAS that delivers it.
The chart shows profit after ad spend across a range of ROAS values, and the table lists the result at each whole ROAS from 1 to 8.
The formulas
ACOS = Ad spend ÷ Attributed revenue
Profit after ad spend = Revenue × Gross margin − Ad spend
Marketing ROI = (Gross profit − Ad spend) ÷ Ad spend
Break-even ROAS = 1 ÷ Gross margin
Target ROAS = 1 ÷ (Gross margin − Target profit margin)Margins are fractions: a 40% margin is 0.40. The target profit margin is profit after ad spend as a share of revenue.
The break-even formula follows from setting profit to zero: revenue × margin must equal spend, so revenue ÷ spend must equal 1 ÷ margin.
A worked example
A store spends $5,000 on ads in a month, and the platform attributes $20,000 of sales to them. The gross margin is 40%.
The ROAS is 4.00× and the ACOS 25.00%. The sales leave $8,000 of gross profit, so the profit after ad spend is $3,000 and the marketing ROI is +60.00%.
The break-even ROAS is 2.50×: below that, the ads cost more than the gross profit they bring. To keep a 10% margin after ads, the campaign needs a ROAS of 3.33×, which at this revenue would allow up to $6,000 of spend.
Margin decides what a ROAS is worth
The same ROAS means very different things at different margins. With the example’s spend and a ROAS of 4.00×:
| Gross margin | Break-even ROAS | Profit after ad spend | Marketing ROI |
|---|---|---|---|
| 20% | 5.00× | -$1,000 | -20.00% |
| 40% | 2.50× | $3,000 | +60.00% |
| 70% | 1.43× | $9,000 | +180.00% |
At a 20% margin a ROAS of 4.00× loses money, while at 70% it is very profitable. Before setting a ROAS target, work out your break-even figure and treat that, not an industry rule of thumb, as the floor.
The revenue-based “ROI” trap
Some reports calculate ROI as (revenue − spend) ÷ spend. For the example that gives +300.00%, against a true marketing ROI of +60.00%. The revenue version is just ROAS minus one, and it treats the cost of the goods as if it were profit. Use gross profit whenever the question is whether the ads made money.
Reading ROAS with care
- Attribution is an estimate. Platforms tend to credit themselves with sales that might have happened anyway, such as branded searches or returning customers. Incremental ROAS, measured with holdout tests, is usually lower than reported ROAS.
- First orders are not the whole story. If ad-acquired customers buy again, a campaign below break-even on the first order can still pay off. The LTV:CAC calculator looks at that longer view.
- Averages hide the margin. A blended ROAS across campaigns can look healthy while individual campaigns lose money.
What this calculator does not include
It counts ad spend only. Agency fees, creative production, software and staff time also belong in the full cost of marketing; add them to the spend for a fuller ROI. It also assumes one gross margin for all products sold and does not model repeat purchases, taxes or fixed costs.