How to use the ROAS calculator
Type the revenue your ads brought in and what you spent on them, and the calculator shows your return on ad spend straight away. Add your gross margin, the share of revenue left after the cost of the product and delivery, and it also tells you whether that ROAS is actually profitable. Everything updates as you type, and nothing you enter leaves your browser.
The ROAS formula
ROAS is revenue divided by ad spend. A ROAS of 4x, or 400%, means every $1 of advertising brought back $4 in sales.
ROAS = revenue from ads / ad spend
Break-even ROAS = 1 / gross margin
Profit after ad spend = revenue x gross margin - ad spendThe break-even line is the part most people skip. At a 40% margin, you keep $0.40 of every sales dollar before advertising, so you need $2.50 of revenue for every $1 of ads just to stand still. That is a break-even ROAS of 2.5x. Anything above it is profit, anything below it is a loss, however good the ROAS looks on a dashboard.
A worked example
An online shop spends $1,250 on ads and records $5,000 in sales from them. Its ROAS is 4x. With a 40% margin, those sales leave $2,000 after product costs, and $750 after the ads are paid. The same 4x ROAS at a 20% margin would lose $250, because the break-even point rises to 5x. The numbers are an illustration; plug in your own to see where you stand.
| Gross margin | Break-even ROAS | ROAS to keep 10% of revenue as profit |
|---|---|---|
| 20% | 5.0x | 10.0x |
| 30% | 3.3x | 5.0x |
| 40% | 2.5x | 3.3x |
| 50% | 2.0x | 2.5x |
| 60% | 1.7x | 2.0x |
| 80% | 1.25x | 1.4x |
How to raise your ROAS
- Cut the cost of each sale: pay for results instead of impressions, drop countries and placements that never convert, and fix the landing page before you buy more traffic.
- Raise the value of each sale with bundles, upsells, and a clear offer on the first order.
- Count repeat purchases. A first-order ROAS below break-even can still be a good deal when customers come back, which is where customer lifetime value comes in.
Paying per approved result makes ROAS easier to control, because your cost per action is fixed before you spend a cent. Pay only for approved results explains how that works on Sharklio.
Frequently asked questions
What is a good ROAS?
One above your break-even ROAS, which depends on your margin. A 3x ROAS is healthy at a 50% margin and a loss at a 25% margin. Work out your break-even first, then set a target a little above it.
How do I calculate break-even ROAS?
Divide 1 by your gross margin as a decimal. At a 40% margin, 1 / 0.4 = 2.5, so you need a ROAS of 2.5x to cover product costs and ad spend.
What is the difference between ROAS and ROI?
ROAS compares revenue with ad spend only. ROI compares profit with what you spent, so it accounts for product costs. A campaign can have a high ROAS and a negative ROI when margins are thin.
Is a ROAS of 2 good?
It breaks even at a 50% margin and makes a profit above it. Below a 50% margin, a 2x ROAS loses money on the first order.