ROAS (Return on Ad Spend) measures how much revenue you generate for each dollar spent on ads. It’s calculated as Revenue ÷ Ad Spend. A ROAS of 3.0x means $3 in revenue for every $1 spent. Higher isn’t always better without margins.
Break-even ROAS is the ROAS you need to cover your COGS, leaving zero profit after ads. It’s based on gross margin: Gross Margin = (Revenue − COGS) ÷ Revenue, then Break-even ROAS = 1 ÷ Gross Margin. Compare your ROAS to this target.
Include the variable costs directly tied to fulfilling orders: product cost, supplier/agent charges, shipping, packaging, and fulfillment/3PL pick-pack fees. If you pay transaction-based fulfillment insurance or duties per order, include them too. Exclude ad spend and fixed overhead for this period.
No. ROAS measures revenue generated per ad dollar (Revenue ÷ Ad Spend). ROI typically measures profit relative to cost, which requires accounting for COGS, fees, refunds, and overhead. A campaign can have strong ROAS but weak ROI if margins are thin.
ROAS is calculated by dividing revenue attributed to ads by the amount spent on ads: ROAS = Revenue ÷ Ad Spend. If you made $10,000 in revenue from ads and spent $2,000, your ROAS is 5.0x. Always align the same time period for both numbers.
800% ROAS equals 8.0x (you made $8 revenue per $1 in ad spend). That’s often strong, but it’s only “good” if your margins support it. High COGS, discounts, refunds, and fees can still reduce profit. Compare 8.0x to your break-even ROAS for the real answer.
Profit After Ads shows what’s left after product costs and advertising spend. In this calculator: Profit After Ads = Revenue − COGS − Ad Spend. It’s a quick “are my ads paying for themselves?” check, before overhead like fees, refunds, apps, or salaries.
ROAS only compares revenue to ad spend, not profit. If your COGS is high, discounts are heavy, or fees/refunds eat margin, you can have a “good” ROAS and still lose money after costs. That’s why break-even ROAS matters and profit-after-ads makes it obvious.
A “good” ROAS depends on your margins. The only ROAS that matters is one that’s above your break-even ROAS with buffer for fees, refunds, and volatility. Many stores need ~2.0–3.0x, but low-margin products may require higher to be truly profitable.
Use any period as long as ad spend, revenue, and COGS match the same window. Weekly or monthly often works best because it smooths daily noise from attribution delays and refunds. For fast testing, 3–7 days is fine, but confirm trends over longer periods.
A 2.5 ROAS means you generated $2.50 in revenue for every $1.00 spent on ads. Whether that’s “good” depends on your gross margin and costs. If your break-even ROAS is 2.0x, then 2.5x leaves room for profit; if it’s 3.0x, you’re underwater.
A good ROAS rate is one that’s comfortably above break-even. First calculate break-even ROAS from your gross margin, then aim for extra buffer to cover fees, refunds, and overhead. Many ecommerce brands target 2–4x, but the right number depends on product margin and scaling goals.
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