ROAS Formula: How to Calculate Return on Ad Spend
The ROAS formula, explained: how to calculate return on ad spend, how it differs for leads and online stores, and the mistakes that make it misleading.
On this page
The ROAS formula is revenue from ads divided by the cost of those ads. A ROAS of 4 means four dollars of revenue for every dollar spent. The formula is simple. The mistakes come from what goes into it. This guide covers the formula, its common variations and the traps, and links to a calculator that does the sums for you.
The formula
ROAS = revenue attributed to ads / ad spend. If $5,000 of ad spend produces $20,000 of revenue, ROAS is 4.0, often written 4x or 4:1. It says nothing about profit on its own, which is why it needs to be read next to your margin.
Variations you will meet
- Break-even ROAS. 1 divided by your profit margin. At a 40% margin, break-even ROAS is 2.5.
- ROAS for leads. When a lead becomes revenue later, divide the revenue from won customers by the spend that produced them.
- Blended ROAS. Total revenue divided by total ad spend across channels, not per platform.
- After returns and fees. Subtract refunds and payment fees from revenue before dividing.
Worked examples
| Case | Result |
|---|---|
| $5,000 spend, $20,000 revenue | ROAS 4.0 |
| 40% margin | Break-even ROAS 2.5 |
| $5,000 spend, $12,500 revenue at 40% margin | ROAS 2.5, so profit after ads is $0 |
| $3,600 spend, 18 customers at $900 | ROAS 4.5 |
Who this guide suits
It suits anyone who reports or reads ad results and wants to be sure the number means what they think it means.
Common mistakes
- Reading ROAS without your margin.
- Counting revenue from all channels against one platform's spend.
- Comparing ROAS across businesses with different margins.
- Ignoring refunds and fees.
Questions about roas formula
What is the ROAS formula?
Revenue attributed to ads divided by ad spend. $20,000 of revenue from $5,000 of spend is a ROAS of 4.
What is a good ROAS?
One above your own break-even ROAS, which is 1 divided by your profit margin. See the ROAS calculator.
How is ROAS different from ROI?
ROAS compares revenue to ad spend. ROI compares profit to total cost, so it can be higher or lower.
How do I calculate ROAS for lead generation?
Divide the revenue from customers won from those leads by the spend that produced them. The lead cost alone is covered by the cost per lead calculator.
Can ROAS be reported automatically?
Marketing Monster reports results across channels for each client. See client reporting for agencies.
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