ROAS Calculator

The formula

How to calculate ROAS

ROAS = Ad revenue / Ad spend

Multiply by 100 for a percentage. Rearranged, the same formula plans a budget: Revenue needed = Target ROAS x Ad spend, and Maximum ad spend = Expected revenue / Target ROAS.

Ad revenue: Revenue attributed to the ads over the period, from the ad platform or your own tracking.
Ad spend: What those same ads cost over the same period.
ROAS %: ROAS x 100: the same figure written as a percentage.
Target ROAS: The ROAS you are aiming for, used to work out the revenue a budget needs or the most you can spend.
Ad cost share of revenue: Ad spend / Ad revenue, as a percentage: the same relationship turned upside down.

Use the same period and the same definition of revenue on both sides. Decide whether revenue includes tax, shipping charged and discounts, and keep it consistent.
Attributed revenue depends on the platform's tracking and attribution window, so any ROAS calculated from it inherits those choices.

Worked examples

Three ROAS calculations, worked through

The numbers are hypothetical, picked to make the arithmetic easy to follow, and work in any currency.

Example 1

Measuring a campaign's ROAS

A month of prospecting ads cost 2,500, and the ad platform attributes 11,250 of revenue to them. The products sold have a 40% gross margin.

Inputs

Ad revenue: 11,250
Ad spend: 2,500
Gross margin: 40%

Working

ROAS: 11,250 / 2,500 = 4.50x
As a percentage: 4.50 x 100 = 450%
Ad cost share of revenue: 2,500 / 11,250 = 22.2%
Gross profit on the ad revenue: 11,250 x 40% = 4,500, which leaves 4,500 - 2,500 = 2,000 after the ads

ROAS

4.50x (450%)

The 2,000 is before payment fees, shipping, refunds and overheads, so it is the most these ads could have earned, not the profit they made.

Example 2

The revenue a budget has to bring in

A store plans to spend 4,000 on ads next month and wants a 3x ROAS. Its products have a 30% gross margin.

Inputs

Target ROAS: 3.00x
Planned ad spend: 4,000
Gross margin: 30%

Working

Revenue needed: 3 x 4,000 = 12,000
Gross profit on that revenue: 12,000 x 30% = 3,600, against 4,000 of ad spend
Left after the ads: 3,600 - 4,000 = -400

Revenue needed

12,000

Hitting this target would still lose 400 on the ads before any other cost, and a bigger budget at the same ROAS would only lose more. At a 30% margin, the target itself has to go up.

Example 3

The most you can spend for a target

A product launch is expected to bring in 9,000 of ad-attributed revenue, and the store wants at least a 3.5x ROAS on it. Gross margin is 50%.

Inputs

Target ROAS: 3.50x
Expected ad revenue: 9,000
Gross margin: 50%

Working

Maximum ad spend: 9,000 / 3.5 = 2,571.43
Gross profit on the expected revenue: 9,000 x 50% = 4,500, which leaves 4,500 - 2,571.43 = 1,928.57 after the ads

Maximum ad spend

2,571.43

The target sets the budget: the same 9,000 would allow 2,250 of spend at 4x and 3,000 at 3x. A higher target leaves more gross profit on each sale but buys less advertising.

Beyond the ratio

What ROAS does and does not tell you

ROAS vs MER

ROAS is read per campaign or per platform, from the revenue that platform credits to its own ads; MER divides all of your store's revenue by all of your marketing spend. For when to use which, and for comparing several ad accounts, see the calculators below.

MER Calculator Multi-Account ROAS Calculator

Why platform ROAS and profit can disagree

A strong ROAS in an ad dashboard can sit next to a thin or even negative profit. These are the usual reasons.

The same order is counted more than once

Meta, Google Ads and TikTok each attribute sales with their own tracking and attribution window. A customer who watched a TikTok video, clicked a Meta ad and then searched on Google can be claimed by all three, so the platforms' attributed revenue can add up to more than the store actually took.

ROAS leaves out product cost

ROAS counts revenue, and product cost (COGS) comes out after it. A high ROAS on a low-margin product can leave less profit than a lower ROAS on a high-margin one.

Fees, shipping and discounts come off later

Payment processing, shipping you do not charge for and discount codes all reduce what an order leaves you, but the ad platform sees the order value before any of them.

Refunds may never reach the ad platform

Unless you send refund adjustments back to it, an ad platform generally keeps a purchase in its reported revenue after the order is refunded, so the revenue behind the ROAS can be higher than what you kept.

The profit check above gives a quick answer from gross margin alone. For the threshold after fees, shipping and refunds, use the Break-Even ROAS Calculator.

Break-Even ROAS Calculator

In MerchantFlow

ROAS next to the profit behind it

MerchantFlow brings in your ad spend from Meta, Google Ads, TikTok and Snapchat and shows ROAS for each platform alongside a blended MER worked out from the orders in your store. The same dashboard takes COGS, payment fees, shipping and refunds off your revenue, so you can see whether your ad spend is turning into profit and not just revenue.

See the real-time P&L

Common Questions

ROAS: FAQ

What is a good ROAS?

There is no ROAS that is good for every store, and a benchmark from someone else's business tells you little about yours. The ROAS that pays for your ads depends on your gross margin and on what else comes off each order: payment fees, shipping, refunds. A store with a high margin can make money at a ROAS that would lose money for a store with a thin one. Work out your own break-even ROAS first, then treat anything above it as the room you have for profit and overheads.

What is the difference between ROAS and ROI?

ROAS compares revenue with ad spend. ROI compares profit with the whole investment. A campaign can show a high ROAS and a poor ROI, because ROAS does not subtract product cost, fees, shipping, refunds or anything you spent besides the ads themselves, such as agency fees or creative production.

What counts as ad spend in a ROAS calculation?

The usual choice is media spend only: what the ad platform charged. You can also include agency fees, creative production or tools, which gives a stricter figure. Either is fine as long as you use the same definition every time, and you do not compare a media-only ROAS with one that includes everything.

Which revenue should I use for ROAS?

It depends on the question you are asking. To compare campaigns or ad sets inside one account, use the revenue that platform attributes to them, because it is the only figure split by campaign. To judge whether your advertising pays off overall, set the revenue your store actually took against all of your ad spend, which is MER rather than ROAS. Mixing the two, such as store revenue over one platform's spend, gives a ROAS that is too high.

Can ROAS be below 1?

Yes. A ROAS below 1x means the ads brought in less revenue than they cost. Some stores accept that on first orders when they know customers come back and buy again, but that only works if the repeat purchases are real and you measure them. Without that, a ROAS below 1x loses money before product cost is even counted.

More Tools

What is ROAS?

Your ad numbers

Revenue and spend

Profit check (optional)

How to calculate ROAS

Three ROAS calculations, worked through

Measuring a campaign's ROAS

The revenue a budget has to bring in

The most you can spend for a target

What ROAS does and does not tell you

ROAS vs MER

Why platform ROAS and profit can disagree

The same order is counted more than once

ROAS leaves out product cost

Fees, shipping and discounts come off later

Refunds may never reach the ad platform

ROAS next to the profit behind it

ROAS: FAQ

What is a good ROAS?

What is the difference between ROAS and ROI?

What counts as ad spend in a ROAS calculation?

Which revenue should I use for ROAS?

Can ROAS be below 1?

Related Calculators

Break-Even ROAS Calculator

Ad Budget Calculator

Shopify Profit Margin Calculator