The simple formula
ROAS equals revenue from ads divided by ad spend. If you spend 10,000 rupees and the ads bring 40,000 rupees in sales, your ROAS is 4.
Why a good ROAS can still lose money
ROAS counts revenue, not profit. If your costs for product, packing, delivery and returns eat up most of the sale, a ROAS of 4 might still leave you with nothing. That is why you need to know your break-even point before you judge any campaign.
How to calculate break-even ROAS
Break-even ROAS equals your selling price divided by the profit you make per order before ad spend.
Example: you sell a product for 1,499 rupees. Product, packing and delivery cost 800 rupees, so your profit before ads is 699 rupees. Divide 1,499 by 699 and you get about 2.14. At a ROAS of 2.14 you break even. Anything above is profit, anything below is a loss.
Setting a target above break-even
A common starting point is to aim for roughly one and a half times your break-even ROAS, so you earn something after ad spend. In the example, that is a target around 3.2. Your real target depends on your goals and how much you want to reinvest.
Cost per lead is the same idea for services
If you sell services, work with cost per lead instead. Take your average sale value, multiply it by the share of leads that become customers, and that tells you the most you can pay per lead and still make money.
Try it with your own numbers
Use the free ROAS calculator on our home page. Put in your price, your cost per order and your monthly ad budget, and it shows your break-even ROAS and how many orders you need. If you want help reading the result, talk to us. It is a core part of our ecommerce work.
Common questions
What is a good ROAS?
There is no universal number. A good ROAS is one that stays comfortably above your own break-even ROAS.