To calculate ROAS, divide the revenue your ads brought in by the amount you spent on those ads. If you spent £1,000 and your ads generated £4,000 in sales, your ROAS is 4. That is usually written as 4:1, 4x or 400%, and it means you got £4 back for every £1 spent.
ROAS stands for return on ad spend. It is one of the quickest ways to see whether Google Ads or Facebook and Instagram Ads are pulling their weight. But a high number does not always mean you are making money, and a lower one is not always bad. It depends on your profit margin, which is why this guide also covers break-even ROAS.
I will keep the maths as friendly as possible, with worked examples for an online shop, a service business and an events business.
The ROAS formula
The formula is:
ROAS = revenue from ads ÷ ad spend
Two things to be clear about:
- Revenue from ads is the sales value that can be linked to your advertising, not your total business turnover.
- Ad spend is the money paid to the advertising platform (such as Google or Meta). If you pay an agency or consultant a management fee, that is separate. You can include it if you want a fuller picture, but just be consistent about which version you use.
Showing ROAS as a ratio and as a percentage
The same result can be shown in a few ways:
- Ratio: 4:1 (£4 of revenue for every £1 spent)
- Multiple: 4x
- Percentage: multiply by 100, so 4 becomes 400%
They all mean exactly the same thing. Google Ads often shows ROAS as a percentage, while many shops and agencies talk in multiples. Just check which one a report is using before you compare numbers.
Worked examples
These are made-up examples to show the method. Your own figures will differ.
Example 1: an online shop
Imagine a small business selling handmade candles online. In one month it spends £1,000 on ads and the ad platform records £4,000 of sales from people who clicked those ads.
- ROAS = £4,000 ÷ £1,000 = 4
- As a ratio: 4:1. As a percentage: 400%.
For online shops, this is the number most people watch first, because each sale is tracked with an exact value. If you sell products online, our guide to e-commerce Facebook and Instagram Ads shows how that side of advertising works.
Example 2: a service business
Now imagine a garden design company that spends £600 on Google Ads in a month. The ads lead to enquiries, and three of those enquiries turn into jobs worth £1,500 each.
- Revenue from ads = 3 × £1,500 = £4,500
- ROAS = £4,500 ÷ £600 = 7.5 (7.5:1, or 750%)
Service businesses often find ROAS harder to track, because the sale happens after a phone call, a quote or a site visit rather than on a checkout page. You need a way to record which jobs started as an ad enquiry. Without that, the revenue side of the formula is a guess.
Example 3: an events business
Imagine a local Christmas market that spends £800 on Meta Ads (Facebook and Instagram) and sells 120 tickets at £25 each through its booking page, all traced back to the ads.
- Revenue from ads = 120 × £25 = £3,000
- ROAS = £3,000 ÷ £800 = 3.75 (3.75:1, or 375%)
Events are a good fit for ROAS because tickets have a clear price and a clear deadline. You can see quickly whether a campaign is working and adjust before the date arrives.
What counts as a good ROAS? Work out your break-even
People often ask for a “good” ROAS, and the honest answer is that it depends on your profit margin. Your profit margin is the share of each sale you keep after the direct cost of delivering it (for example the cost of the product, materials or delivery).
Your break-even ROAS is the point where the ads earn back exactly what they cost, before any other overheads. The formula is:
Break-even ROAS = 1 ÷ profit margin
Write the margin as a decimal, so 40% becomes 0.4.
Break-even example
Say the candle business keeps 40% of each sale after the cost of making and sending the candles.
- Break-even ROAS = 1 ÷ 0.4 = 2.5
To check: spend £1,000 and bring in £2,500 of sales. Forty per cent of £2,500 is £1,000, which exactly covers the ad spend. At a ROAS of 2.5 you have neither made nor lost money on that advertising.
Some quick comparisons:
- 50% margin: break-even ROAS of 2
- 40% margin: break-even ROAS of 2.5
- 25% margin: break-even ROAS of 4
So a ROAS of 4 is brilliant for a business with a 50% margin, but only break-even for one with a 25% margin. That is why copying someone else’s target is risky.
Turning that into profit
Back to the candle shop at a ROAS of 4 with a 40% margin:
- Revenue from ads: £4,000
- Gross profit at 40%: £1,600
- Less ad spend: £1,000
- Profit from the ads: £600
That is a healthy result, and it sits comfortably above the break-even point of 2.5. If you want to set a sensible target, aim for something clearly above your break-even figure, so there is room to cover overheads and still make a profit.
Real-world ROAS examples
For Summerhill & Bishop, an e-commerce brand, Google Ads has consistently delivered around 10x ROAS. In plain terms, that is about £10 of revenue for every £1 spent. We manage this kind of campaign through Google Ads management, and results vary from business to business, so it is an example rather than a promise.
For events, our Christmas at Bewl Water case study shows what Meta Ads can do for ticket sales: £26,864 in attributed ticket revenue. “Attributed” simply means revenue the advertising platform and tracking link back to the ads. I have not worked out a ROAS for Bewl Water here, because that would need the ad spend figure alongside the revenue.
ROAS vs ROI: what is the difference?
These two terms get mixed up a lot.
- ROAS looks at revenue compared with ad spend. It ignores your costs of delivering the product or service.
- ROI (return on investment) looks at profit compared with what you put in. It tells you whether you actually made money.
A simple way to work out advertising ROI is: (gross profit from ads minus ad spend) ÷ ad spend × 100.
Using the candle shop again: (£1,600 minus £1,000) ÷ £1,000 × 100 = 60% ROI. The ROAS was 400%, but the ROI was 60%. Both are correct, they just answer different questions. ROAS is good for comparing campaigns quickly. ROI is better for deciding whether the advertising is worth continuing.
The limits of ROAS
ROAS is useful, but it does not tell the whole story. Watch out for these:
- It ignores profit. A high ROAS on low-margin products can still lose money. That is why break-even matters.
- It relies on good tracking. If your conversion tracking is set up badly, the revenue figure can be too high, too low or missing. A good tracking setup is part of analytics, tracking and conversion optimisation.
- Platforms can over-claim. Google and Meta may both take credit for the same sale. Compare their numbers with your actual bank or sales records.
- It misses the longer view. A customer who spends £50 today may spend much more over a year. A low first-sale ROAS can still be worthwhile if customers come back, but only if you can prove that.
- It does not cover offline sales. Phone calls, visits and word of mouth after an ad can be hard to attribute.
- It does not show where the problem is. If ROAS is poor, the cause could be the ads, the website or the offer. Looking at your cost per lead and your website conversion rate alongside ROAS helps you find where the money is leaking.
How to use ROAS in practice
- Work out your profit margin and your break-even ROAS.
- Check that your tracking records sales or enquiry values accurately.
- Calculate ROAS for each campaign, not just overall, so you can see what is working.
- Review it over a sensible period, such as a month, rather than reacting to a single day.
- Compare it with real profit, not just the platform dashboard.
If you are still deciding how much to put into advertising, how much a small business should spend on Google Ads is a useful next read.
Frequently asked questions
What is a good ROAS?
It depends on your profit margin. Divide 1 by your margin to find your break-even ROAS, then aim to be comfortably above it. A ROAS of 3 might be excellent for one business and a loss for another.
Is ROAS the same as ROI?
No. ROAS compares revenue with ad spend. ROI compares profit with what you invested. ROAS can look impressive while ROI is small, especially if your margins are tight.
Can a ROAS below 1 ever be acceptable?
Sometimes. A ROAS below 1 means the first sale did not cover the ad cost. If customers reliably come back and buy again, that can still pay off over time, but only if you have real data to prove it.
Should I include VAT in my revenue figure?
Ideally, no. If you are VAT registered, use revenue excluding VAT, because that is the money you keep. Whichever you choose, use the same approach every time so your comparisons are fair.
How do I work out ROAS for a business that gets enquiries rather than online sales?
Record which enquiries came from ads, then add up the value of the jobs or sales that followed. Divide that by your ad spend. It takes a bit more admin than an online shop, but it gives you a real figure to work with.
Want help working out your own ROAS?
If you are not sure whether your ads are making you money, I can take a look. I will check your tracking, your numbers and your break-even point, and tell you plainly what I find. You can request a free digital audit and we can go from there.
If you would rather just talk it through, get in touch. Digital AdDoctor is a digital marketing agency with a human touch, and if we grow you, we grow together.
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