ROAS = Revenue / Ad Spend
Profit = (Revenue x Margin%) - Ad Spend
ROI = (Profit / Ad Spend) x 100%
Cost Per Order = Ad Spend / Number of Orders
ROAS is revenue divided by what you spent to make it. Profit is what's left after the margin on that revenue minus the ad spend. Cost per order tells you the ad cost side of unit economics.
A worked example
$25,000 revenue, $10,000 spend, 50% margin:
- ROAS = 25,000 / 10,000 = 2.5x
- Profit = (25,000 x 0.50) - 10,000 = $12,500 - $10,000 = $2,500
- ROI = (2,500 / 10,000) x 100 = 25%
- If 100 orders: cost per order = 10,000 / 100 = $100
A 2.5x ROAS on a 50% margin business means you made $2,500 on $10,000 spent. Scale works when the next $10,000 brings the same $2,500 profit. Stop when marginal ROAS falls below break-even.
ROAS is not the only metric
ROAS tells you if the campaign is profitable. Three habits make it actionable:
- Watch marginal ROAS, not average. The first $1,000 of spend might be 4x, the next $5,000 might be 1.5x, and the last $10,000 might be 0.8x. The average stays fine long after you should have stopped spending.
- ROAS is margin-dependent. A 2.5x ROAS on a 60% margin is a win. The same 2.5x on a 20% margin is a loss. Always compute both metrics.
- Set the bid target below break-even times 1.3. Most teams guess. A campaign with a 2x break-even ROAS should target 2.6x to 3x to leave room for variation. Use this calculator to find your break-even first.
When to scale and when to cut
Scale when:
- ROAS is at least 1.5x your break-even ROAS (usually 2x or higher).
- Marginal ROAS on the most recent spend sits above break-even.
- You have tested the next tier of budget and it holds.
Cut when:
- Average ROAS falls below break-even.
- Marginal ROAS on new spend has slipped below break-even on two consecutive days or days.
- The audience is exhausted and new segments do not respond.
Questions people ask
What is a good ROAS?
One that exceeds your break-even ROAS by a safe margin. There is no universal number. A 4x ROAS is a loss at a 20% margin and excellent at a 60% margin. Compute your break-even using the break-even ROAS calculator first.
Should I include shipping in revenue or as a cost?
If customers pay for it, it is part of revenue. If you absorb the cost, count it as a cost. Either way, your margin should reflect the actual customer money.
What if I do not know my exact margin?
Start with cost of goods divided by price, then add 5% for fees and other variable costs. For services, use the billable rate minus the direct cost (labour, materials) divided by the rate.
Does ROAS include fixed costs?
No. ROAS is a per-order metric: does this campaign's revenue cover its variable costs plus the ad spend? Fixed costs (salaries, rent, software) belong in a P and L, not in ROAS.
How do I know when to stop scaling?
Stop when the marginal return on the last tranche of spend falls below your break-even ROAS. At that point each new dollar is a loss. You can continue with an existing budget if it is profitable, but new spend is no longer justified.
Last reviewed 11 September 2026. Formulas and benchmarks are published on the page so you can check them. This tool gives estimates, not quotes.
