What is ROAS?
ROAS (return on ad spend) measures how much revenue your advertising generates for every unit of currency you spend on it. A ROAS of 4x means every €1 of ad spend produced €4 in attributed revenue. It measures how efficiently ads drive revenue, not whether that revenue is profitable.
How to calculate ROAS
ROAS formula
ROAS = Revenue from ads ÷ Ad spend. To express it as a percentage, multiply by 100.
Example
A campaign spends €15,000 and generates €72,000 in attributed revenue: €72,000 ÷ €15,000 = 4.8x, or 480%. Use the same time period and the same attribution model for spend and revenue, or the result won't mean much.
What is break-even ROAS?
Break-even ROAS is the ROAS at which the gross margin earned on ad-driven revenue exactly covers your ad spend. The formula is 1 ÷ gross margin. At a 60% gross margin, break-even ROAS is 1 ÷ 0.60 = 1.67x. Below that, your ads cost more than the gross margin they bring in.
How gross margin affects break-even ROAS
| Gross margin | Break-even ROAS |
|---|---|
| 80% | 1.25x |
| 60% | 1.67x |
| 40% | 2.5x |
| 25% | 4x |
| 10% | 10x |
The lower your margin, the higher the ROAS you need just to break even.
Estimated contribution after ad spend
Estimated contribution after ad spend = Revenue × gross margin − Ad spend. It's the revenue left after the estimated cost of goods/services and ad spend. It does not include sales costs, salaries, software, agency fees, overhead, taxes, or other business expenses, so it doesn't show your overall profitability or ROI. In the example above, at a 60% gross margin: €72,000 × 60% − €15,000 = €28,200.
What is a good ROAS?
There's no universal number. A good ROAS is one above your break-even point that meets your own target, taking into account your margin, customer lifetime value, sales costs and sales cycle. In B2B, revenue from a closed deal can arrive months after the first click, and a customer may renew for years, so a ROAS that looks low in-quarter can still be a sound investment. A high ROAS can still lose money if margins are thin.
ROAS vs ROI
ROAS compares revenue with ad spend only. ROI compares profit with your total investment: ROI = (gain − cost) ÷ cost. A campaign can show a 3x ROAS and still have a negative ROI once product costs, sales time, tools and agency fees are included. Use ROAS to compare advertising efficiency; use ROI to judge the business return. The estimated contribution after ad spend in this calculator is not ROI, because it doesn't include your other business costs.
Common ROAS mistakes
- Mixing time periods or attribution windows between spend and revenue.
- Counting pipeline value as revenue. In B2B, use closed-won revenue, or label pipeline-based ROAS clearly.
- Judging ROAS without your gross margin.
- Comparing ROAS across channels that use different attribution.
- Including agency or tool fees in spend for some campaigns but not others.
- Ignoring refunds, returns and churned contracts.
Frequently asked questions
- Is a 4x ROAS good?
- It depends on your margin. At a 60% margin, break-even is 1.67x, so 4x leaves a healthy contribution after ad spend. At a 20% margin, break-even is 5x, so 4x doesn't cover the ad spend.
- Can a campaign have a high ROAS and still lose money?
- Yes. If your gross margin is low, or other costs such as sales time, salaries, tools and fees are high, a campaign can show a strong ROAS and still be unprofitable. Add your margin above to see your estimated contribution after ad spend, then account for your other costs.
- What does estimated contribution after ad spend include?
- Revenue minus the estimated cost of goods/services (based on your gross margin) and minus ad spend. It does not include sales costs, salaries, software, agency fees, overhead, taxes, or other business expenses.
- What revenue should B2B marketers use?
- Use revenue you can attribute to the campaign over a period that reflects your sales cycle, ideally closed-won revenue. If you use pipeline or forecasted revenue, label the result as an estimate.
- Can I type numbers with commas or periods?
- Yes. You can type 15,000, 15.000 or 15 000 for thousands, and 4.8 or 4,8 for decimals. The calculator shows how it read each number under the field.
- Does adcerebrum store the numbers I enter?
- No. The calculator runs in your browser and doesn't send your numbers anywhere.