Marketing Australia
ROAS Calculator
Enter revenue and ad spend for the ratio everyone quotes. Add your gross margin and the calculator returns the number that actually matters: the ROAS you have to beat before the campaign contributes anything at all.
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Revenue minus cost of goods, as a percentage of revenue
Return on ad spend
—Break-even ROAS
—
Gross profit
—
Profit after ad spend
—
Cost as % of revenue
—
How do you calculate ROAS?
Divide revenue attributed to the campaign by what you spent on it. Ten thousand dollars of revenue from $2,500 of ad spend is a ROAS of 4, usually written 4×. On its own that number says nothing about profit — it has to be compared with the break-even ROAS implied by your gross margin.
ROAS is not ROI
The two get used interchangeably in conversation and mean different things.
ROAS compares revenue with ad spend. It ignores cost of goods, and it ignores every other cost in the business.
ROI compares profit with the total investment, and it should include the cost of what you sold, the platform fees, the agency retainer and the time spent managing the campaign.
ROAS survives as the day-to-day metric because it is fast, it is available inside every ad platform, and it is comparable between campaigns. Its weakness is that it flatters low-margin businesses badly — which is exactly what the break-even figure on this page corrects.
Getting the margin figure right
Gross margin here means revenue minus cost of goods sold, divided by revenue. For a product business that is the landed cost of the item plus any per-unit fulfilment. For a service business it is the direct delivery cost.
What it should not include is fixed overhead — rent, salaries, software. Those are not driven by the extra sale the campaign produced, so folding them into the margin makes the break-even figure too pessimistic and can talk you out of profitable advertising.
Do include payment processing and shipping if you cover them. On a low-value product those two together can be five to ten points of margin, which moves the break-even ROAS noticeably.
How this is calculated
Two ratios, and the comparison between them is the entire point.
ROAS = revenue ÷ ad spendbreak-even ROAS = 1 ÷ gross margingross profit = revenue × gross marginprofit after ad spend = gross profit − ad spendACoS (cost as % of revenue) = ad spend ÷ revenue × 100
Break-even ROAS falls straight out of the margin. At a 25 per cent margin every revenue dollar leaves 25 cents to pay for the advertising that produced it, so you need four dollars of revenue per dollar spent just to break even — a break-even ROAS of 4.
At a 70 per cent margin the same arithmetic gives 1.43. Which is why a 3× ROAS is a comfortable win for one business and a loss for another, and why the bare ratio should never be reported without the margin beside it.
A worked example: the same 4× at two margins
A campaign returns $10,000 of revenue on $2,500 of spend. What that means depends entirely on the margin behind it.
- ROAS — 10,000 ÷ 2,5004.0×
- At a 45% margin, gross profit$4,500
- Less ad spend−$2,500
- Profit after ad spend$2,000
- Break-even ROAS at 45% — 1 ÷ 0.452.22×
- At a 20% margin, break-even would be5.0×
At a 45% margin the campaign clears $2,000. At a 20% margin the identical 4× ROAS loses $500.
Nothing about the campaign changed between those two lines. Only the margin did, and it moved the result from profitable to unprofitable.
What the ratio still cannot see
Even margin-adjusted, ROAS is a snapshot of one purchase attributed to one campaign, and three things sit outside it.
Repeat purchase is the big one. A customer worth $80 on the first order and $400 over two years turns a break-even acquisition into a good one, and a first-purchase ROAS cannot see any of that.
Attribution is the second. Platforms report on their own conversions and count generously; the sum of every platform's claimed revenue routinely exceeds what the business actually took.
Incrementality is the third and the least comfortable. Some of the revenue credited to a campaign would have arrived without it, particularly on branded search where the customer was already looking for you.
What this calculator does not do
- Uses revenue attributed by the ad platform, which is generally generous
- First purchase only — it does not model repeat purchase or lifetime value
- Excludes fixed overhead by design, so it is not a whole-business profit figure
- Cannot separate incremental sales from sales that would have happened anyway
Common questions
What is a good ROAS?
There is no universal figure — it depends entirely on gross margin. A business at a 70% margin breaks even at 1.43×, so 3× is strong. A business at a 20% margin breaks even at 5×, so the same 3× loses money.
How do you calculate break-even ROAS?
Divide 1 by your gross margin expressed as a decimal. A 40% margin gives 1 ÷ 0.4 = 2.5, so you need $2.50 of revenue for every dollar of ad spend before the campaign contributes anything.
What is the difference between ROAS and ACoS?
They are reciprocals. ACoS is ad spend as a percentage of revenue, so a 4× ROAS is a 25% ACoS. Marketplace sellers tend to use ACoS and search advertisers tend to use ROAS, but they carry identical information.
Should ROAS include GST?
Use revenue excluding GST, because the GST is not yours to keep. Reporting GST-inclusive revenue against GST-exclusive ad spend overstates ROAS by about 10 per cent.
Why does the platform report a higher ROAS than my accounts?
Attribution windows and modelled conversions. A platform credits itself for conversions inside its own window, and every platform does the same on the same sale. Comparing total reported revenue against actual sales for the period usually shows the gap immediately.
Where these numbers come from
- Investopedia — return on advertising spend Fixed definitions, nothing to go out of date
Method last reviewed 2026-10-28 This calculator uses fixed rules rather than rates that change, and its method is re-checked against the sources above at least once a year. Out of date? Tell us and we will fix it.
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