ROAS Calculator

How to Calculate ROAS, Break-Even ROAS and Target ROAS

Updated

ROAS is the first number most advertisers check and the easiest to misread. A campaign at 4x can lose money and one at 2x can be the strongest campaign in the account, because the answer depends on what you keep from each sale. This guide walks through the formulas with one example store so the numbers connect.

ROAS and ad ROI

ROAS is revenue from ads divided by ad spend. Spend 1,000 dollars, get 4,000 dollars in orders, and ROAS is 4x, or 400 percent. ROI goes one step further and counts profit: revenue times margin, minus ad spend, divided by ad spend. At a 30 percent margin that same campaign made 1,200 dollars of gross profit on 1,000 dollars of ads, an ROI of 20 percent. Platforms report ROAS because they do not know your margin, so adding it is your job.

Break-even ROAS and target ROAS

Break-even ROAS is 1 divided by margin. Keep 30 percent of each sale and you need 1 divided by 0.3, about 3.33x, to come out even. Set a profit goal and the formula becomes 1 divided by margin minus target profit: for a 10 percent net profit on that 30 percent product, 1 divided by 0.2, or 5x. Measure margin after product cost, shipping, payment and marketplace fees and returns. A 4x campaign on a 20 percent margin product loses 20 cents on every ad dollar, however good it looks in the ad manager.

Max CPA and a worked example

Max CPA is the most you can pay for one order: average order value times margin. Say a store sells a 50 dollar item with 15 dollars of product cost, 6 dollars of shipping and 2 dollars in fees. Margin is 27 dollars, or 54 percent, so break-even ROAS is 1.85x and max CPA is 27 dollars. Last month it spent 2,000 dollars and got 90 orders, 4,500 dollars in revenue: ROAS 2.25x, cost per order 22.22 dollars, gross profit 2,430 dollars, and 430 dollars left after ads. Above break-even, but a 10 percent return rate would take about 240 dollars of that, which is why the calculator has a returns field.

Open the ROAS calculator CPM calculator

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