What is a good ROAS? Work out your break-even point first

Why a benchmark ROAS can mislead you

ROAS is the revenue from ads divided by the ad spend. 5× means $5 of revenue for every $1 spent. It compares revenue with ad cost and leaves product costs out, so a campaign can show a healthy ROAS and still lose money once you count what the products cost.

The figure that marks where loss turns into profit is the break-even ROAS, 1 ÷ profit margin. With a 40% margin you need 2.5× just to cover the ad cost. With a 25% margin you need 4×. A common benchmark is 4×, which sits well above break-even for the first business and only breaks even for the second.

Measure ROAS, then trace it back

Enter the ad revenue and spend in the ROAS Calculator, together with your profit margin. $25,000 of revenue on $5,000 of spend is 5.0×, or 500%. With a 25% margin the break-even ROAS is 4.0×, so that campaign makes money. The calculator also solves for revenue or budget: to reach 4× on $5,000 of spend you need $20,000 in revenue. It counts only ad spend as cost, so add agency and creative fees yourself if you want them included.

When ROAS falls below break-even, the PPC Calculator shows where the money goes. From cost, clicks, impressions, and conversions it works out cost per click, click-through rate, conversion rate, and cost per acquisition. $1,000 for 2,500 clicks from 100,000 impressions is a $0.40 CPC and a 2.5% CTR, and if 50 of those clicks convert, the CPA is $20. CPA is usually the number that decides profit. You can lower it by paying less per click, raising the click-through rate, or raising the conversion rate on the landing page.

Plan the next budget with the Ad Spend Calculator. Multiply the conversions you want by the CPA you can afford: 400 conversions at a $25 target CPA is $10,000, or $333.33 a day over 30 days. Start from what a customer is worth. If an average order brings $80 of profit, a CPA above $80 loses money on the first sale.