A ROAS of 4 means £4 of sales for every £1 spent. Whether that is good depends entirely on your margin: break-even ROAS is one divided by your margin, so a business that keeps 25% of each sale needs a ROAS of 4 just to cover the ads.
The formula
- ROAS=revenue ÷ ad spend
- Break-even ROAS=1 ÷ gross margin
- Gross profit after ads=revenue × gross margin − ad spend
What is a good ROAS?
Any ROAS above your break-even, by enough to cover overheads. There is no universal good figure: a ROAS of 3 makes money at a 50% margin, where break-even is 2, and loses money at a 20% margin, where break-even is 5. A benchmark ROAS quoted without a margin tells you nothing about your own business.
ROAS vs ROI
ROAS compares revenue with ad spend only. ROI, return on investment, compares profit with every cost involved: the products, the fees, the time. A campaign can show a high ROAS and a negative ROI if the products are low-margin or the fees are high.
Where ROAS misleads
ROAS ignores what the products cost you, so it treats a low-margin sale the same as a high-margin one; the POAS calculator fixes that. It counts returns and cancellations as revenue unless your tracking removes them. And it credits the ads with sales that might have happened anyway, which only an incrementality test can separate.