ROAS Calculator
Plug in your revenue, ad spend, and gross margin. Get ROAS, the break-even ROAS your margin actually demands, and — if you set a target profit % — the target ROAS that banks it, with a clear profitable / below-target / losing-money verdict.
The break-even insight
A simple formula that catches more bad campaigns than any other: break-even ROAS = 1 ÷ gross margin.
- 50% margin → break-even at 2.0× ROAS
- 30% margin → break-even at 3.3× ROAS
- 20% margin → break-even at 5.0× ROAS
- 10% margin → break-even at 10.0× ROAS
Most e-commerce stores running paid ads on a 20–30% margin need a 3–5× ROAS just to not lose money. The "good" ROAS thresholds you'll see in marketing blogs are typically tuned for software (60–80% margin), where 2× ROAS is genuinely profitable. Using those thresholds for physical-goods ads is how a lot of brands accidentally lose money.
From break-even to target: the verdict
Break-even is the floor, not the goal. Set a target profit % (the share of revenue you want left after COGS and ad spend) and the calculator computes target ROAS = 1 ÷ (margin − target profit), then grades your actual ROAS against both lines:
- Green — profitable above target. ROAS ≥ target ROAS. Scale-worthy.
- Amber — above break-even, below target. Not losing money, but not hitting the profit goal. Improve creative, cut CPCs, or accept thinner profit.
- Red — losing money on ads. ROAS below 1 ÷ margin. Every dollar of spend erodes gross profit.
The tool also restates the result as money: ad spend as a % of revenue, and what every $1 of spend returns in revenue and in gross profit after your margin.
Related
FAQ
What's the formula?
ROAS = revenue / ad spend. A 4× ROAS means $4 of revenue for every $1 spent on ads.
Why does break-even ROAS depend on my margin?
ROAS uses revenue, not profit. If your gross margin is 25%, only $0.25 of every revenue dollar is left after cost-of-goods. So a 4× ROAS gives you $4 revenue × 25% = $1.00 — exactly breaking even on the $1 spent. The break-even ROAS = 1 ÷ margin. Lower margins mean higher required ROAS.
Is ROAS the same as ROI on ads?
No, but related. ROAS is a ratio (revenue / spend); ROI is a percentage of profit (profit / spend). For a 4× ROAS at 25% margin: profit per $1 spent = revenue × margin − spend = $4 × 0.25 − $1 = $0. ROI = 0%. Same scenario, different framing.
What's a target ROAS and how is it calculated?
Break-even ROAS only tells you where you stop losing money. A target ROAS tells you the return you need to actually bank a chosen profit. The formula: target ROAS = 1 ÷ (gross margin % − target profit %). Example: 60% margin, and you want to keep 10% of revenue as profit → 1 ÷ (0.60 − 0.10) = 2.0×. If your target profit is at or above your gross margin, no ROAS can hit it — the calculator shows a dash and tells you why.
What do the verdict badges mean?
Profitable above target (green): your ROAS clears both break-even and your target — the campaign banks at least your chosen profit %. Above break-even, below target (amber): the ads aren't losing money, but they're not hitting your profit goal either. Losing money on ads (red): ROAS is below the break-even your margin requires — every dollar of spend destroys gross profit.
What does "ad spend is X% of revenue" mean?
It's the inverse of MER (marketing efficiency ratio) — the share of every revenue dollar that goes back into ads. A 4× ROAS means ad spend is 25% of revenue. Many finance teams prefer this framing because it slots directly into a P&L: if ads eat 25% of revenue and COGS eats 70%, only 5% is left for everything else.
Should I include returns / refunds?
Yes — use net revenue (after returns) for the most honest number. Many ad platforms report gross revenue from conversions; if your return rate is 10%+, the platform's ROAS will overstate reality.