Free Tool
ROAS Calculator: Work Out Your Break Even and Target ROAS
Most advertisers are told to chase a “good ROAS” without ever being shown where that number should come from. It comes from your gross margin. This free ROAS calculator takes your margin and ad spend and tells you the return you need just to break even, and the return you need to actually make money.
No email address required. The formula and the reasoning are underneath, so you can sanity check every number it gives you.
Your numbers, not a benchmark
The Metric
What is ROAS?
ROAS stands for return on ad spend. It is the revenue your ads generate divided by what you spent on them. Spend £1,000 and generate £3,000 of tracked revenue, and your ROAS is 3.0x, sometimes written as 300%.
On its own the number tells you almost nothing, because it ignores what the revenue cost you to fulfil. A 3.0x ROAS is comfortably profitable for a store with 70% gross margins and a guaranteed loss for a store on 25%. That is why this calculator starts with your margin, not with a benchmark borrowed from someone else's business.
The Arithmetic
How to work out your break even ROAS
The formula is one line: break even ROAS = 1 ÷ contribution margin, where contribution margin is your gross margin minus other variable costs like shipping, pick and pack and payment fees, all as a share of revenue.
| Contribution margin | Break even ROAS | What that means |
|---|---|---|
| 20% | 5.00x | Every £1 of spend must return £5 before profit |
| 30% | 3.33x | Typical for lower-margin retail |
| 40% | 2.50x | |
| 50% | 2.00x | £2 back per £1 spent just to stand still |
| 60% | 1.67x | Typical for DTC brands with strong margins |
| 70% | 1.43x |
Two stores can run identical campaigns with identical ROAS and one gets rich while the other quietly loses money. The difference is the margin, which is why we ask for it before any conversation about ad budgets.
Setting Targets
Target ROAS: adding your profit goal
Break even keeps the lights on. To make money, extend the same formula: target ROAS = 1 ÷ (contribution margin minus your profit goal). A store with a 50% contribution margin that wants 10% net profit on ad-driven revenue needs 1 ÷ 0.40, a 2.50x target.
This is also the honest way to set target ROAS bidding in Google Ads. Feeding the algorithm a target plucked from a blog post means automating a strategy you never checked. Feeding it a target derived from your own margin means the machine optimises towards profit.
Three ways platform ROAS misleads you
The number in Ads Manager is a claim, not a till receipt. Judge it against store revenue.
Attribution optimism
Ads Manager and Google Ads both claim conversions that customers would have made anyway, especially from brand search and retargeting. Reconcile platform figures against store revenue before believing them.
Modelled numbers
Since iOS privacy changes and consent banners, platforms model part of what they report. Consent and tracking gaps cut both ways, so the number is an estimate rather than a fact.
Blended customers
A 4.0x blended ROAS built mostly on existing customers is not growth, it is expensive retargeting of people who already knew you. Split new from returning before celebrating.
If the maths says it should work but your account doesn't
The calculator tells you what return your margin demands. If your campaigns are consistently below that line, the fix is usually in targeting, creative, tracking or landing pages rather than in spending more. That is the work we do.
- Paid social for eCommerce: Meta ads with the break even arithmetic on this page built into every plan, from £1,500 a month in ad spend.
- Google Ads management: targets set from your margin per campaign, reporting reconciled to store revenue.
- Paid media and PPC: the full picture, including Shopping, Microsoft Ads and landing pages.
ROAS Calculator FAQs
There is no universal good ROAS. It depends entirely on your contribution margin. A 3.0x return is strong for a 60% margin store and loss-making at 25%. Work out your break even with the calculator above, then judge any campaign against that line rather than an industry benchmark.
Divide 1 by your contribution margin. Contribution margin is gross margin minus other variable costs such as shipping and payment fees, as a share of revenue. A 40% contribution margin gives 1 ÷ 0.4, a break even ROAS of 2.5x.
ROAS compares ad revenue to ad spend and ignores every other cost. ROI compares profit to total investment, including product costs, fees and overheads. ROAS is the day-to-day optimisation metric; ROI is the board-level truth. A campaign can have a healthy ROAS and a negative ROI.
Platform-reported ROAS never does; it only sees media spend. For a true picture, add management fees to the spend side before dividing, or fold them into the variable costs field in the calculator above. It is one of the quiet ways paid media looks more profitable on a dashboard than it is in your accounts.
POAS is profit on ad spend: gross profit generated divided by spend, rather than revenue divided by spend. It bakes your margin into the metric, so 1.0x is break even for everyone. It is a better optimisation signal when your products have very different margins, but it needs accurate cost data in your store to work.
Derive it from your own numbers: 1 ÷ (contribution margin minus profit goal), then add a buffer for the platform's attribution optimism. Setting it too high too early starves the algorithm of data; too low and you scale losses efficiently. Start near break even, prove tracking is honest, then tighten.
Attribution windows, modelled conversions and double counting between platforms all inflate the platform view. If Meta and Google each claim the same sale, your blended numbers cannot both be true. Reconcile against store revenue monthly and treat the platform figure as directional.