How to Calculate ROAS: Formula, Examples and What Is a Good Ratio
Return on ad spend (ROAS) tells you how much revenue your ads generate for every dollar invested. Learn the formula, follow a worked example and understand what ratio is healthy for your profit margins.
The ROAS formula
ROAS stands for return on ad spend. The formula is:
ROAS = Revenue from ads ÷ Ad spend
You can express the result as a ratio or a percentage: a ROAS of 2:1 is the same as 200%, meaning every dollar of ad spend returns two dollars of revenue, as Shopify explains in its ROAS guide.
Worked example
Suppose you spent $2,000 on a Google Ads campaign and it drove $10,000 in revenue. Your ROAS is $10,000 ÷ $2,000 = 5, or 5:1 (500%) — for every dollar invested you recovered five.
Compare that with a campaign that spent $2,000 and returned $1,200: a 0.6:1 ROAS, meaning you lost money on the media itself before accounting for any other costs. The ROAS calculator runs this in one click.
What is a good ROAS?
There is no universal target: a good ROAS depends on your profit margin, operating costs and business goals, as Shopify notes. The math that matters is your break-even ratio: if your product margin is 25%, you need a 4:1 ROAS just to cover the ad spend; if the margin is 50%, break-even sits at 2:1.
Many e-commerce advertisers treat 4:1 as a strong target and anything above 2:1 as workable, but always compute your own break-even before judging a campaign.
ROAS vs ROI
ROI (return on investment) includes every cost — ad spend plus agency fees, tools and labor — while ROAS only divides ad revenue by ad spend. ROAS is the media-level view; ROI is the business-level view. Track both: a campaign can look great on ROAS and still lose money once overhead is included.
Frequently asked questions
What is a good ROAS?
It depends on your profit margin and overhead. The key number is break-even ROAS = 1 ÷ margin: at a 25% margin you need 4:1 to break even, and many e-commerce teams target 4:1 or higher.
How do I calculate ROAS?
Divide revenue from ads by ad spend. For example, $10,000 in revenue on $2,000 of ad spend is a 5:1 ROAS. The ROAS calculator above does it instantly.
What is the difference between ROAS and ROI?
ROAS only divides ad revenue by ad spend. ROI factors in all costs — agency fees, tools, labor — so it is the fuller business-level picture. ROAS is the media-level view.
Is a ROAS of 2:1 good?
At 2:1 you double the money spent on media, but after product costs and overhead you may be at or below break-even depending on your margin. Compute 1 ÷ margin to find your own break-even ratio.