What is a good ROAS?
A good ROAS is any return above your break-even ROAS with enough margin left for profit. Break-even ROAS equals 1 divided by your gross margin. A business with a 50% margin breaks even at 2x, so a 3x to 4x ROAS is healthy. A business with a 20% margin needs 5x just to break even.
This is why the often-quoted rule that 4x is a good ROAS can be misleading. It is a reasonable figure for some businesses and a losing one for others.
How do you calculate ROAS?
Divide the revenue generated by advertising by the amount spent on that advertising. $20,000 in revenue from $5,000 in ad spend is a 4x ROAS, which can also be written as 400%.
You can check any campaign in our ROAS calculator, which also shows profit after ad spend.
How do you find your break-even ROAS?
Divide 1 by your gross margin as a decimal. Gross margin is the share of revenue left after the direct cost of delivering the product or service.
| Gross margin | Break-even ROAS |
|---|---|
| 20% | 5.00x |
| 30% | 3.33x |
| 40% | 2.50x |
| 50% | 2.00x |
| 60% | 1.67x |
| 75% | 1.33x |
To add a profit goal, use 1 ÷ (gross margin − target profit margin). With a 50% margin and a 15% profit target, the target ROAS is 1 ÷ 0.35 = 2.86x. The break-even ROAS calculator runs this for you.
Why can a high ROAS still lose money?
ROAS measures revenue, not profit. If margins are thin, or if platform reports count sales that would have happened anyway, a high ROAS can hide a loss.
- Low margins. A 4x ROAS on a 20% margin product loses money on every sale after ad costs.
- Branded search. Campaigns bidding on your own brand name often show very high ROAS because those buyers were already looking for you. See is Performance Max wasting your money?
- Double counting. Google, Meta and other platforms can each claim the same sale.
Should ROAS goals differ by channel?
Often, yes. Search campaigns that capture existing demand usually show higher ROAS than awareness channels such as streaming TV, TikTok or prospecting on Meta, which create demand that converts later or through other channels.
Judge demand-creation channels by their effect on total results, including branded search volume and blended ROAS across all channels, not only by the ROAS each platform reports. For example, the La Mesa Oktoberfest campaign is measured by blended ROAS across channels.
How do you improve ROAS?
Cut wasted spend, raise conversion rate and increase the value of each sale. Those three levers raise ROAS without relying on cheaper clicks.
- Remove search terms, placements and audiences that spend without converting.
- Improve the landing page so more visitors buy or inquire. See landing page optimization.
- Raise average order or customer value with bundles, upsells or better follow-up.
- Feed real revenue values into ad platforms so bidding optimizes for value, not volume.