Formulas
ROAS = Revenue ÷ Ad spend
Break-even ROAS = 1 ÷ Gross margin
Profit = Revenue × Margin − Ad spend
Break-even ROAS = 1 ÷ Gross margin
Profit = Revenue × Margin − Ad spend
Example: You spend $2,000 on ads and they generate $8,000 of sales: a 4:1 ROAS. With a 40% gross margin, break-even ROAS is 2.5:1 and the campaign leaves $1,200 of profit ($3,200 gross profit − $2,000). ACoS is 25%.
Beyond ROAS
- New customers may buy again — judge acquisition campaigns with customer lifetime value.
- Attribution windows differ between platforms; compare like with like.
- Include agency fees and creative costs in ad spend for a true picture.
Estimate what a customer is worth over time with the customer lifetime value calculator.
Frequently asked questions
How do I calculate ROAS?
ROAS = revenue from ads ÷ ad spend. $8,000 of revenue from $2,000 of ads is a ROAS of 4:1 (or 400%).
What is break-even ROAS?
The ROAS at which gross profit exactly covers ad spend: 1 ÷ gross margin. With a 40% margin you need a ROAS of 2.5 to break even.
What is a good ROAS?
It depends on margins. A 4:1 ROAS is often quoted as a benchmark, but a low-margin store may need 5:1 while a high-margin product can be profitable at 2:1.
What is ACoS?
Advertising cost of sales, used on Amazon: ad spend ÷ ad revenue. It is the inverse of ROAS — a 4:1 ROAS is a 25% ACoS.