ROAS Calculator (Return on Ad Spend)

ROAS vs. profitable ROAS

Standard ROAS is revenue ÷ ad spend. A 5× ROAS means $5 revenue for every $1 spent. It's easy to compute and easy to compare, which is why every ad platform reports it. But it can be deeply misleading. A 5× ROAS sounds great until you realize a product with 20% gross margin lost money at that ratio: $5 revenue × 20% margin = $1 gross profit, exactly equal to the $1 ad spend. Net zero.

Profit-adjusted ROAS = (revenue × gross margin) ÷ ad spend. This is the number that actually tells you if the campaign made money. Above 1× = profitable. Below 1× = subsidizing growth. Many ecommerce founders track this as 'true ROAS' or 'POAS' (profit on ad spend).

The breakeven multiple

Breakeven ROAS = 1 ÷ gross margin. At 50% margin, you breakeven at 2× ROAS. At 30%, breakeven is 3.33×. At 20%, you need 5×. This is the ROAS floor below which every dollar of ad spend destroys gross profit.

Knowing the breakeven number changes how you read campaign reports. If your reports show 4× ROAS for a 25% margin product, the campaign is just barely above breakeven (4× × 25% = 1.0×). It's not 'crushing it' — it's barely breaking even at the gross level, before fixed costs, returns, and customer service.

For sustainable growth, target ROAS comfortably above breakeven: 1.5-2× breakeven covers fixed costs and provides margin for expansion. So at 30% gross margin, target 5-6× ROAS, not 3.33×.

What ROAS doesn't show

Lifetime value. A breakeven ROAS on first purchase can be highly profitable if customers reorder. Subscription and consumables businesses often run at 1.5-2× first-order ROAS knowing the LTV/CAC ratio supports it. Look at 30/60/90-day repeat purchase data before judging.

Returns and refunds. Reported revenue typically includes orders that will be refunded. Industry-wide return rates run 5-30%. Adjust the input downward by your actual return rate for honest analysis.

Attribution decay. Platforms like Meta and Google use 1-7 day click attribution, which over-credits paid for purchases that would have happened anyway. Use marketing-mix modeling or incrementality testing for ground truth — ROAS alone overstates paid contribution.

Fixed overhead. ROAS doesn't account for warehouse rent, software, salaries. It's a campaign-level metric, not a P&L metric. Don't conflate the two.