Return on Ad Spend (ROAS) Calculator
Example: Revenue from ads: 20000 $ · Ad spend: 5000 $ · Cost of goods (% of revenue): 40 %
| ROAS (revenue per $1 spent) | 4 |
| Net ROI after cost of goods | 140.00% |
| Profit after ad spend | $7,000 |
Worked example
Spend $5,000 on ads and generate $20,000 in revenue, and your ROAS is 4.0, four dollars back for every one spent. But if cost of goods is 40% of revenue, only $12,000 is gross profit. Subtract the $5,000 ad spend and you keep $7,000, a 140% net ROI. The 4.0 ROAS looked great and it was, but the net view is what confirms the channel actually makes money.
Frequently asked questions
What is a good ROAS?
The right number tracks your margins. A business with thin margins may need a ROAS of 4 or higher just to break even after product costs, while a high-margin digital product can profit at a ROAS of 2. That is why net ROI, not ROAS alone, is the real test.
Why does ROAS alone mislead?
Because it ignores the cost of what you sold. A 3.0 ROAS on a product with 70% cost of goods can lose money, while the same ROAS on a 20%-cost product is highly profitable. Always pair ROAS with your margin.
What is break-even ROAS?
It is one divided by your gross margin. At a 40% cost of goods (60% margin), break-even ROAS is about 1.67; below that the ads lose money before you even count overhead. Aim comfortably above your break-even ROAS.
Should I include all ad costs?
Yes. Include the full ad spend plus any agency or creative fees tied to the campaign. Leaving costs out inflates ROAS and hides a channel that is not truly profitable.