Enter your ad spend and the revenue it produced. You'll get your ROAS, and, if you add your gross margin, the break-even ROAS, the real profit or loss on the spend, and the target ROAS to type into Google Ads.
ROAS is a speedometer. Break-even ROAS is the speed limit.
Return on ad spend is the simplest metric in advertising: revenue divided by ad spend. Spend $2,000, get $7,000 back, ROAS is 3.5x, and in a Google Ads target field that is written as 350%. Every dashboard shows it, every agency reports it, and on its own it answers absolutely nothing, because it compares revenue with spend while your bills are paid out of profit.
The number that turns ROAS into an answer is break-even ROAS: 1 divided by your gross margin. At a 50% margin, each revenue dollar carries 50 cents of gross profit, so $2 of revenue covers $1 of ads: break even at 2.0x. At a 20% margin you need 5.0x just to not lose money. The same 3.5x campaign is a solid winner for one store and a slow leak for another, and neither can tell which from the ROAS column. That is why the margin field on this page is optional in form and mandatory in spirit.
The formula
ROAS = Revenue ÷ Ad spend Break-even ROAS = 1 ÷ Gross margin
Profit = Revenue × Margin − Ad spend Target ROAS = (1 + Profit per ad $) ÷ Margin
Margins are decimals in the formulas (25% = 0.25). Amazon sellers meet the same idea upside down: ACoS is spend divided by revenue, so break-even ACoS is simply your margin.
Worked example
A store spends $2,000 on ads and books $7,000 of revenue: a 3.5x ROAS (350%). The team celebrates.
The store's gross margin is 25%, so break-even ROAS is 1 ÷ 0.25 = 4.0x. The $7,000 carries 7,000 × 25% = $1,750 of gross profit against $2,000 of spend: the celebrated campaign is losing $250.
For this store to earn 20 cents per ad dollar, the target is (1 + 0.20) ÷ 0.25 = 4.8x: type 480% into the tROAS field, not 350.
ROAS vs ROI, and which margin to use
ROAS and ROI get swapped as carelessly as markup and margin, and the same way around: the flattering one gets said out loud. ROAS divides revenue by spend; ROI divides profit by spend. The 3.5x ROAS above sounds like "350% return"; the actual ROI is −12.5%. When someone quotes a return, ask which numerator they used.
For the margin, use contribution margin on the advertised products: revenue minus cost of goods, payment fees, shipping, and fulfillment, the costs that scale with each order. Using your company-wide gross margin flatters product lines with heavy fulfillment costs, and using net margin (after rent and salaries) double-counts overhead that exists whether or not the ads run. And one boundary this page states plainly: ROAS is a per-campaign lens on immediate revenue. If your customers reorder for years, a campaign can be worth running below break-even ROAS on the first order, but that is a lifetime value decision, and our customer lifetime value calculator is where to make it honestly.
Frequently asked questions
What is ROAS and how is it calculated?
Return on ad spend: revenue attributable to your ads divided by what the ads cost. Spend $2,000 and book $7,000 and your ROAS is 3.5x, which Google Ads expresses as 350%. It measures revenue efficiency, not profit, which is the entire catch.
What is a good ROAS?
There is no universal answer, because good means profitable and profitability depends on your margin. Break-even ROAS is 1 divided by gross margin: 2.0x at a 50% margin, 5.0x at 20%. A widely quoted 4x benchmark is a winner for the first store and a money-loser for the second, so compute your own line before judging any campaign against it.
What is break-even ROAS?
The ROAS at which a campaign makes exactly nothing: 1 divided by your gross margin as a decimal. At a 25% margin, break-even is 4.0x, because it takes four revenue dollars at 25 cents of profit each to pay back one ad dollar. Below that line a campaign loses money no matter how healthy the ROAS looks.
What is the difference between ROAS and ROI?
ROAS divides revenue by spend; ROI divides profit by spend. A 3.5x ROAS at a 25% margin sounds like a 350% return but is actually a negative 12.5% ROI, because the revenue cost 87.5% of itself in goods and ads. When a report says return, check which numerator it means.
Which margin should I use for break-even ROAS?
Contribution margin on the advertised products: revenue minus cost of goods, payment fees, shipping, and fulfillment. Company-wide gross margin flatters heavy-fulfillment products, and net margin double-counts overhead that exists whether or not the ads run.
How do I set a target ROAS in Google Ads?
Work it out from profit, not habit: (1 + desired profit per ad dollar) divided by margin, entered as a percentage. Wanting 20 cents per ad dollar at a 25% margin means 4.8x, typed as 480. Then set the live target modestly below your recent actual ROAS at first, since a target far above what the campaign has achieved mostly just throttles delivery.
What is ACoS and how does it relate to ROAS?
Amazon's advertising cost of sales is the same fraction upside down: spend divided by revenue. A 3.5x ROAS is a 28.6% ACoS, and break-even ACoS is simply your margin. Sellers comparing notes across platforms are usually translating between these two without realizing it.
Can it make sense to run ads below break-even ROAS?
Yes, in exactly one situation: when customers come back. If a first order loses $5 but the average new customer returns $60 of profit over the following years, the campaign is an investment in acquisition, not a leak. That is a lifetime value decision; make it with real retention numbers rather than optimism.