ROAS Calculator
Work out return on ad spend from revenue and ad cost, plus the break-even ROAS for your margin. A third mode gives the target ROAS that keeps the profit you want after paying for the ads.
Your numbers
Sales the ads brought in.
Share of each sale left after the cost of the goods or service. Optional in ROAS mode, where it adds the break-even check.
ROAS
- As a percent
- –
Arithmetic on the numbers you typed; the revenue is what your ad platform or store attributes to the ads.
Gross margin here is the share of each sale left after the cost of the goods or service, before ad spend.
The calculation runs in your browser and ParrotNotes does not store your numbers. They sit in the page address so you can bookmark or share the result.
How to calculate ROAS
ROAS = revenue from ads ÷ ad spend. A campaign that cost $3,000 and brought in $12,000 of sales has a ROAS of $12,000 ÷ $3,000 = 4.00: every $1 of ads returned $4 of revenue. As a percent that is 400%, which is how Google Ads states a target ROAS ($5 of sales per $1 of ad spend is 500%).
Revenue here is what your ad platform or store attributes to the ads. Use the same dates for both numbers, and subtract refunds and cancelled orders if your report does not, or the ROAS looks better than the bank account.
Break-even ROAS: the number your margin sets
A ROAS of 4.00 can be a good result or a loss, depending on what you keep from each sale. With a gross margin of 40%, the $12,000 of sales leaves $12,000 × 0.40 = $4,800 of gross profit; take away the $3,000 of ads and $1,800 is left. The ads pay for themselves when the gross profit equals the ad spend, which happens at a ROAS of 1 ÷ margin: 1 ÷ 0.40 = 2.50.
So break-even ROAS = 1 ÷ gross margin. At a 25% margin it is 1 ÷ 0.25 = 4.00, and the same 4.00 campaign only breaks even. Your margin comes from your prices and costs; the Margin Calculator works it out if you do not have it to hand.
Target ROAS for the profit you want
Breaking even is not the goal. To keep a share of revenue as profit after the ads, take that share off the margin first: target ROAS = 1 ÷ (margin − profit to keep). At a 40% margin, keeping 15% of revenue needs 1 ÷ (0.40 − 0.15) = 4.00.
If the profit you want is as large as the margin, no ROAS gets there: the ads would have to be free. That is the moment to look at price or cost rather than at the campaign.
ROAS vs ROI
ROAS compares revenue with ad spend only. ROI compares profit, after every cost, with what was invested: product cost, shipping, fees, the time to run the campaign. A campaign with a ROAS above 1.00 can still have a negative ROI. Use ROAS to steer the ads day to day and the ROI Calculator to judge whether the whole thing paid.
Turning ad leads into closed deals? See sales KPIs, trade show leads.
The revenue in ROAS is often closed on a call
ROAS counts the sales the ads brought in, and many of those sales close on a phone call or a visit. Record those calls on your phone with ParrotNotes and you get the transcript and summary, so every quote and promise is written down.
Get ParrotNotes freeRelated tools
- Margin and Markup CalculatorWork out margin, markup and selling price from cost, convert markup to margin, and see what a discount does to your margin before you quote.Open the tool
- ROI CalculatorWork out return on investment, annualized ROI and payback period from what you put in and what you get back, for a purchase or a customer's business case.Open the tool
- CPM CalculatorWork out CPM, total ad cost or impressions from the other two, plus CPC and CPA when you add clicks and conversions.Open the tool
- CTR CalculatorWork out click-through rate from clicks and impressions, or the clicks or impressions you need for a target CTR.Open the tool