Metrics guide
What is a good ROAS?
ROAS, return on ad spend, is revenue divided by ad spend. A good ROAS is not one number for everyone: it is the ROAS above your break-even, and break-even ROAS is 1 divided by your contribution margin. A business keeping 50% of each sale breaks even at 2.00x; one keeping 25% needs 4.00x.
Reviewed Oct 3, 2026
The formulas
From ROAS to a good ROAS in four formulas
- ROAS
ROAS = revenue ÷ ad spend
$20,000 of revenue on $5,000 of spend is 4.00x, often written 400%.
- Contribution margin
Margin = (order value − variable costs) ÷ order value
Variable costs are every cost that grows with one more order: product, shipping, payment fees, returns.
- Break-even ROAS
Break-even ROAS = 1 ÷ margin
At a 40% margin, 1 ÷ 0.40 = 2.50x. Below it, ads cost more than the orders they bring contribute.
- Target ROAS
Target ROAS = 1 ÷ (margin − profit share)
To keep 10% of revenue as profit at a 40% margin: 1 ÷ 0.30 = 3.33x.
ROAS by margin
Break-even and target ROAS by margin
Each figure is derived from the formulas above, not collected from other accounts.
| Contribution margin | Break-even ROAS | Keep 10% of revenue | Keep 20% of revenue |
|---|---|---|---|
| 20% | 5.00x | 10.00x | Not reachable |
| 30% | 3.33x | 5.00x | 10.00x |
| 40% | 2.50x | 3.33x | 5.00x |
| 50% | 2.00x | 2.50x | 3.33x |
| 60% | 1.67x | 2.00x | 2.50x |
| 70% | 1.43x | 1.67x | 2.00x |
| 80% | 1.25x | 1.43x | 1.67x |
Profit share is profit after ad spend divided by revenue, before fixed costs. Not reachable means the margin cannot leave that profit at any ROAS.
01
ROAS meaning and formula
ROAS stands for return on ad spend. It divides the revenue attributed to advertising by the advertising spend over the same period. A ROAS of 4.00x, or 400%, means four dollars of revenue for every dollar of ads.
The revenue in the formula depends on who measures it. Meta and Google each credit conversions under their own attribution rules, while a store records every order. State the source next to any ROAS you compare.
ROAS is not ROI. It ignores product cost, shipping, fees and returns, which is exactly why the same ROAS can be a profit for one business and a loss for another.
02
Why there is no universal good ROAS
A figure quoted as a good ROAS for everyone hides the margin behind it. At a 4.00x ROAS, ad spend is 25% of revenue. A business that keeps 60% of revenue after variable costs has 35 points left; one that keeps 20% loses 5 points on every sale.
That is why this guide derives targets instead of quoting averages from other accounts: the only inputs that decide your answer are your own costs.
03
Find your break-even ROAS
Take one average order. Subtract product cost and every cost that grows with an order: shipping you pay, payment fees, packaging, expected returns. What remains, divided by the order value, is the contribution margin.
Break-even ROAS is 1 divided by that margin. The break-even ROAS calculator does the arithmetic from your order value and costs, and also returns the maximum CPA you can pay per order.
04
From break-even to a target
Break-even leaves nothing for fixed costs or profit, so a working target sits above it. Decide what share of revenue should remain after ad spend and use 1 ÷ (margin − profit share).
Some businesses accept a first-order ROAS below break-even because customers come back. Do that only when repeat purchases are measured and the business can fund the delay.
- Platform ROAS: which campaigns a platform credits
- Blended ROAS: store revenue against all ad spend
- MER: store revenue against all marketing cost
Worked example
The same 4.00x ROAS in three businesses
| Business | Contribution margin | Break-even ROAS | Result at 4.00x ROAS |
|---|---|---|---|
| Low-margin store | 20% | 5.00x | $2,000 loss |
| Mid-margin store | 35% | 2.86x | $4,000 profit |
| High-margin brand | 60% | 1.67x | $14,000 profit |
Illustrative: $10,000 of ad spend returning $40,000 of revenue in each case. Results are before fixed costs.
FAQ
Common questions
What is a good ROAS?
One above your break-even ROAS by the profit you want to keep. Break-even ROAS is 1 divided by contribution margin, so a business with a 40% margin breaks even at 2.50x and needs 3.33x to keep 10% of revenue as profit before fixed costs.
What does ROAS mean?
ROAS means return on ad spend: the revenue attributed to advertising divided by what the advertising cost.
What is the ROAS formula?
ROAS = revenue ÷ ad spend, over the same period and from the same revenue source. $20,000 on $5,000 of spend is 4.00x.
Is a 2x ROAS good?
It breaks even at a 50% contribution margin. With a higher margin it is profitable before fixed costs; with a lower margin each sale loses money after ads.
Should I judge ROAS in the ad platform or in the store?
Both, for different questions. Platform ROAS compares campaigns inside one platform. Blended ROAS, store revenue divided by all ad spend, tells you whether paid media as a whole pays back.