Business
ROAS Calculator
Works return on ad spend, which measures revenue rather than profit.
Result
ROAS measures revenue, not profit. A 4× ROAS at a 20% margin loses money, which is why the break-even figure matters more than the headline number.
Get a Free Business AuditHow the calculation works
Revenue attributable to advertising divided by the advertising spend. It is a revenue multiple rather than a profitability measure, which means a figure above one does not indicate the advertising made money and the break-even multiple depends entirely on the gross margin.
What moves the number
- Attributed revenue and the attribution model behind it.
- Gross margin, which sets the break-even multiple.
- Whether management and creative costs are in the spend.
- Incrementality of the attributed revenue.
Where this one goes wrong
The break-even return on ad spend is one divided by the gross margin, which means a business with a thin margin needs a high multiple simply to avoid losing money while a high-margin business profits at a much lower one. Calculate your own break-even multiple before setting any target. Platform attribution is also generous to itself, so two platforms can each claim the same sale and the reported figures can sum to more than the business actually sold.
Before you quote
- Calculate your own break-even multiple from your gross margin.
- Reconcile attributed revenue against actual total sales.
- Include management and creative cost in the spend.
Questions
About this calculator
What return on ad spend do I need?
One divided by your gross margin, as the break-even point. A thin-margin business needs a high multiple simply to avoid losing money, while a high-margin business profits at a much lower one, so there is no general target.
Does a multiple above one mean the advertising worked?
No, because it is a revenue multiple rather than a profit measure. The cost of delivering what was sold still has to come out, and below the break-even multiple the advertising lost money despite returning more revenue than it cost.
Can I trust the platform's figure?
As an upper bound. Platform attribution is generous to itself and two platforms can each claim the same sale, so the reported figures can sum to more than the business actually sold. Reconciling against total sales catches it.
The formula
ROAS = revenue ÷ ad spend; break-even ROAS = 1 ÷ gross margin
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How to use this calculator
- Ad spend ($). Enter your own figure; the page starts at $5,000.
- Revenue generated ($). Enter your own figure; the page starts at $22,000.
- Gross margin on that revenue (%). Enter your own figure; the page starts at 45%.
The result updates as you type, so you can try a figure, see what it does to roas, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Ad spend | $5,000 |
| Revenue generated | $22,000 |
| Gross margin on that revenue | 45% |
What comes out
| Result | Value |
|---|---|
| ROAS main result | 4.4× |
| Break-even ROAS at your margin | 2.2× |
| Gross profit after ad spend | $4,900 |
| ROAS as a percentage | 440% |
A ROAS of 4.4× against a break-even of 2.2× leaves $4,900 of gross profit after ad spend.
How sensitive the answer is
Holding everything else steady and changing only ad spend, this is what happens to roas. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Ad spend ($) | ROAS |
|---|---|
| $2,500 | 8.8× |
| $3,750 | 5.9× |
| $5,000 example above | 4.4× |
| $7,500 | 2.9× |
| $10,000 | 2.2× |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Ad spend ($)
- A money amount, starting at $5,000.
- Revenue generated ($)
- A money amount, starting at $22,000.
- Gross margin on that revenue (%)
- A percentage, between 0 and 100, starting at 45%.
What the results tell you
| Result | What it is |
|---|---|
| ROAS | The headline result. A number. |
| Break-even ROAS at your margin | A number. |
| Gross profit after ad spend | A money figure. |
| ROAS as a percentage | A percentage. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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