ROAS Calculator

What is ROAS?

ROAS stands for Return On Ad Spend. It measures how much revenue you earn for every dollar spent on advertising. A ROAS of 4x means you earn $4 in revenue for every $1 spent on ads. It is the most important metric for evaluating the performance of paid advertising campaigns.

ROAS vs ROI

ROAS measures revenue generated per ad dollar, while ROI (Return On Investment) measures actual profit generated. ROAS does not account for product costs, fees, or overhead. A campaign with 4x ROAS might have negative ROI if your product costs eat up most of the revenue. That is why True ROAS (ROAS after product costs) is a much more useful metric for ecommerce businesses.

How to Calculate ROAS

The basic formula:

For a more accurate picture, use True ROAS:

True ROAS tells you how many dollars of gross profit you generate per ad dollar. If your True ROAS is below 1x, you are losing money on every sale regardless of what the ad platform reports.

What is a Good ROAS?

The minimum acceptable ROAS depends on your margins:

• High-margin products (60%+ gross margin): 2x ROAS can be profitable
• Medium-margin products (30-60%): Need 3-4x ROAS to profit
• Low-margin products (under 30%): Often need 5x+ ROAS

The breakeven ROAS formula is: 1 / Net Margin %. If your net margin is 25%, your breakeven ROAS is 4x. Anything above that is profit.

Platform ROAS vs True ROAS

Ad platforms (Meta, Google, TikTok) report ROAS based on attributed revenue divided by ad spend. This number is often inflated because it does not account for product costs, shipping, fees, refunds, or returns. True ROAS strips away all those costs to show you the actual return on your ad investment. It is common to see a platform ROAS of 4x but a True ROAS of only 1.2x after accounting for all expenses. Use the calculator above to find your real number.