FreedomWhat Is ROAS? How to Calculate It and What a Good ROAS Is
What ROAS means, how to calculate it, and how to set a good ROAS from your own margin. Worked examples in USD and CAD for stores and service businesses.
Itamar DrorUpdated 11 min read
Return on ad spend
United States and Canada
What is ROAS, and what does ROAS stand for?
ROAS stands for return on ad spend: how many dollars of sales came back for every dollar you put into ads. It is a ratio, so the math is the same in US and Canadian dollars. Google's Target ROAS setting uses a percentage (350%); you will also see 3.5x.
The revenue side is what Google and Meta call conversion value: what a sale or a lead is worth to you. A conversion is the action you count, such as a purchase, a call or a form.
Where ROAS fits in your business
You run an online store
ROAS is your main steering number. Each order carries its real value, so the platforms can report revenue per dollar spent.
You run a service business
Calls and forms arrive without a price. ROAS works once each lead gets a value based on how often leads become paying jobs.
You are just starting with ads
Watch cost per sale or per lead first. ROAS needs a steady flow of valued sales, and Google lists a minimum for its ROAS bidding.
How to calculate ROAS
Two inputs, both for the same dates: ROAS = revenue from ads / ad spend. For a percentage, multiply by 100.
Google's Target ROAS help page uses this example: USD 5 in sales from USD 1 in ad spend is a 500% ROAS. A ROAS of 1, or 100%, means the ads brought back exactly what they cost, before you paid for the products.
- Ad spend for the month
- USD 2,000
- Revenue from orders the ads brought in
- USD 7,000
- ROAS = 7,000 / 2,000
- 3.5
- The same ROAS as a Target ROAS percentage
- 350%
Every dollar of ads brought back USD 3.50 in sales. Whether that made money depends on the margin, which is the next section.
Illustration only, not client data.
How to find ROAS in Google Ads and Meta
In Google Ads, add the column Google calls Conversion value/cost: that is ROAS for the campaigns and dates you selected. In Meta Ads Manager it is Purchase ROAS, which Meta defines as purchase conversion value divided by amount spent.
Both depend on your tracking sending the order value with each purchase. If the value column is empty, or every sale shows the same amount, fix the tracking first.
What is a good ROAS?
There is no single good ROAS, because the answer depends on gross margin: the share of each sale left after you pay for the product, shipping and payment fees. A ROAS that makes one store rich can sink another.
The break even rule is simple: break even ROAS = 1 / gross margin. At a 40% margin, 1 / 0.40 = 2.5. Below 2.5, every order the ads bring in loses money once the ad cost is paid.
- 20% gross margin5 times ad spend
- 30% gross margin3.33 times ad spend
- 40% gross margin2.5 times ad spend
- 50% gross margin2 times ad spend
- 60% gross margin1.67 times ad spend
- 70% gross margin1.43 times ad spend
At a 40% margin, each USD 1 or CAD 1 of ads must bring in 2.50 in sales to break even.
Arithmetic: break even ROAS = 1 / gross margin. Illustration only, not client data.
Break even is the floor. Your target sits above it, where the profit you want is left after the ads are paid. Take your gross margin, subtract the share of sales you want to keep as profit, and divide 1 by what is left.
- Average order
- USD 100
- Product cost, shipping and payment fees
- USD 60
- Gross margin = (100 less 60) / 100
- 40%
- Break even ROAS = 1 / 0.40
- 2.5
- Profit you want to keep, as a share of sales
- 10%
- Room left for ads = 40% less 10%
- 30%
- Target ROAS = 1 / 0.30
- 3.33, or 333%
Below a ROAS of 2.5 this store loses money on every order the ads bring in. At 3.33 it keeps 10% of sales as profit after paying for the ads.
Illustration only, not client data.
A very high ROAS can be a warning too. Google's Target ROAS page says a target set too high may limit the traffic your ads get. Such a campaign may be buying only the surest sales, such as people who already know your brand, while passing on sales that would still pay.
ROAS vs ROI vs MER vs CPA
These four numbers get mixed up in ad reports, yet each answers a different question.
| Metric | Formula | What it tells you |
|---|---|---|
| ROAS, return on ad spend | Revenue from ads / ad spend | Sales per dollar of ads |
| ROI, return on investment | (Profit less cost) / cost | Did the ads make money after product costs? |
| MER, marketing efficiency ratio | All store revenue / all marketing spend | Sales per dollar of all marketing, every channel |
| CPA, cost per acquisition | Ad spend / number of sales or leads | What one sale or lead cost |
- Ad spend on Google Ads
- USD 2,000
- Revenue Google Ads credits to the ads
- USD 7,000
- Orders from those ads
- 70
- Gross margin
- 40%
- ROAS = 7,000 / 2,000
- 3.5
- Gross profit = 7,000 x 40%
- USD 2,800
- ROI = (2,800 less 2,000) / 2,000
- 40%
- CPA = 2,000 / 70 orders
- USD 28.57
- All store revenue, every channel
- USD 12,000
- All marketing spend, every channel
- USD 3,000
- MER = 12,000 / 3,000
- 4.0
Each ad dollar returned 3.5 in sales and 40 cents of profit once product costs and the ads were paid. All marketing together returned 4 dollars of store revenue per dollar.
Illustration only, not client data.
ROAS and CPA come from the ad platform and carry its way of counting. ROI and MER come from your own books. If platform ROAS climbs while MER stays flat, the platforms may be claiming sales your store would have made anyway.
Why your ROAS in Google Ads does not match your store
The ROAS in Google Ads and Meta is platform reported. Each platform counts the sales it believes it caused, under its own rules, while your store counts each order once.
- Time windows. Google Ads records a purchase made within a set time after a click. The default click window is 30 days, and it can be set from 1 to 90 days depending on the conversion source.
- Views as well as clicks. Meta reports under attribution settings such as 1 day view, 1 day click, 7 day click and 28 day click. A view setting can credit someone who saw an ad and never clicked.
- Modeling. Meta's Purchase ROAS page says statistical modeling may be used for some events it cannot count directly, and for their values.
- Overlap. A shopper who clicks a Google ad, then a Meta ad, can be claimed by both, so together the platforms can report more revenue than your store took in.
Our article on why your ROAS is lying, linked at the end, covers attribution models and double counting between Google Ads and GA4 in depth.
How online stores and service businesses use ROAS
If you run an online store
Send the real value of each order to Google Ads and Meta. Google's conversion values page suggests transaction specific values when each sale has a different value, which fits any store with more than one price.
Then judge each campaign against your break even ROAS. Target ROAS, a Google Ads bidding setting that aims for the average conversion value per dollar you choose, should be set from your margin. Google lists at least 15 conversions in the past 30 days for it on Search and Shopping campaigns, and the conversions need values.
If you run a service business
A lead has no price when it arrives, so you give it one. Value per lead = the share of leads that become paying jobs x your average job value, both taken from your CRM or your records of closed jobs.
- Ad spend for the month
- CAD 3,000
- Leads (calls and forms)
- 30
- Share of leads that become paying jobs
- 10%
- Average job value
- CAD 4,000
- Value per lead = 10% x 4,000
- CAD 400
- Lead value for the month = 30 x 400
- CAD 12,000
- ROAS on lead value = 12,000 / 3,000
- 4.0
- Gross margin on a job
- 35%
- Break even ROAS = 1 / 0.35
- 2.86
On paper the month clears break even. If only two jobs close instead of three, revenue is CAD 8,000 and ROAS is 2.67, under break even.
Illustration only, not client data.
Lead based ROAS is an estimate until the jobs close. Recheck it monthly against the jobs your CRM marks as won.
Check your ROAS this week
- Write down your gross margin after product cost, shipping and payment fees.
- Work out break even ROAS: 1 divided by that margin.
- Pull ad spend and ad revenue for the last full month from each platform, and the orders or closed jobs your store or CRM recorded for the same dates.
- If the platforms claim more revenue than the store recorded, fix tracking before you change budgets.
- Confirm each purchase sends its real order value, since a fixed value hides which products earn the money.
Questions owners ask about ROAS
What does ROAS mean in marketing?
ROAS means return on ad spend: the revenue from your ads divided by the cost of those ads. A ROAS of 4 means 4 dollars in sales for every dollar spent, in USD or CAD. It measures sales; profit is a separate question.
How do you calculate ROAS as a percentage?
Divide ad revenue by ad spend, then multiply by 100. USD 6,000 in sales from USD 1,500 in ads is 4, or 400%. Google Ads uses the percentage form for Target ROAS.
What is a good ROAS for Google Ads?
One above your break even ROAS, which is 1 divided by your gross margin. At a 50% margin that is 2, or 200%; at 25% it is 4, or 400%. A single benchmark for every business ignores your margin.
Is a ROAS of 2 good?
Only if your gross margin is above 50%. At exactly 50% a ROAS of 2 breaks even, while at 30% margin you need 3.33 to break even, so a ROAS of 2 loses money on every sale the ads bring in.
What is the difference between ROAS and ROI?
ROAS compares revenue to ad spend. ROI compares profit to cost, so it takes out what the products cost you. A campaign can show a healthy ROAS and still lose money once product costs are paid.
Why is my ROAS different in Google Ads, Meta and my store?
Each platform counts the sales it believes it caused, with its own windows and rules, and one sale can be claimed twice. Your store counts each order once. Trust the store, and use platform ROAS to compare campaigns inside one platform.
For attribution windows, attribution models and double counting in depth, read Why Your ROAS Is Lying to You: GA4 Attribution Explained.
To have your tracking and ROAS checked against your own store numbers, see the Free PPC Audit for Google and Meta.
Sources
- Google Ads Help: About Target ROAS bidding (checked 2026-10-15)
- Google Ads Help: About conversion values (checked 2026-10-15)
- Google Ads Help: About conversion windows (checked 2026-10-15)
- Meta Business Help Center: Purchase ROAS (return on ad spend) (checked 2026-10-15)
- Meta Business Help Center: Compare attribution settings in Meta Ads Manager (checked 2026-10-15)
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