Calculate return on ad spend and true return on investment after cost of goods.
ROAS ignores the cost of goods, so a campaign can show a healthy ROAS while losing money. The break-even ROAS is the reciprocal of the gross margin, which is the threshold that actually matters. At a 62 per cent margin, break-even sits around 1.6 times ad spend, so a ROAS of 2 that looks strong is in fact only modestly profitable once goods and other costs are counted.
ROAS/ROI
ROAS = revenue ÷ ad spend; ROI = (gross profit − total cost) ÷ total cost
ROAS = revenue ÷ ad spend; ROI = (gross profit − total cost) ÷ total cost ROAS ignores the cost of goods, so a campaign can show a healthy ROAS while losing money. The break-even ROAS is the reciprocal of the gross margin, which is the threshold that actually matters.
At a 62 per cent margin, break-even sits around 1.6 times ad spend, so a ROAS of 2 that looks strong is in fact only modestly profitable once goods and other costs are counted.
This calculator takes 4 inputs: Revenue generated, Advertising spend, Gross margin, Other campaign costs. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.