Glossary
ROAS (Return on Ad Spend)
ROAS, or return on ad spend, is the revenue your ads bring in for every dollar you spend on them.
Formula
ROAS = revenue from ads ÷ ad spend
Example
If you spend $2,000 on ads and they bring in $10,000 in sales, your ROAS is 5x (or 500%).
How to read it
A ROAS below your break-even point loses money on the first sale. Your break-even ROAS is 1 divided by your profit margin: at a 40% margin, you break even at 2.5x.
Why it matters
ROAS tells you whether your ads are making money. For service businesses the key is where the revenue number comes from: the ad platform's estimate, or real sales matched back to the ads.
Common mistakes
- Trusting the platform's ROAS without checking it against real sales.
- Comparing ROAS across businesses with very different margins.
- Ignoring repeat purchases, which make a lower first-sale ROAS profitable.
How to improve ROAS
- Measure it against real sales, not the platform's estimate.
- Cut campaigns that bring leads but no customers, and move budget to the ones that sell.
- Raise the value of each sale with packages or memberships.
- Follow up faster so more leads turn into paying customers.
Related: Ad budget calculator
Related terms
Cost Per Acquisition (CPA)Cost per acquisition, or CPA, is how much you spend on ads to get one conversion, such as a booking or a sale.Customer Lifetime Value (LTV)Customer lifetime value, or LTV, is the total revenue you can expect from one customer over the whole time they stay with you.Marketing AttributionMarketing attribution is working out which ads and channels led to each lead and sale, so you know what's actually working.