ROAS and ROI calculator

Enter what you spent on ads, the sales those ads brought in and your margin. The calculator returns your ROAS, the profit left after ad costs, your ROI and your break-even ROAS: the lowest return at which the ads stop costing you money. It works for Google Ads, Facebook and Instagram, Microsoft Ads or any other paid channel, provided you can tie the revenue to the spend.

How to fill it in

1. Ad spend. What the platform charged you for the period you are checking; a calendar month is usually the cleanest. If you are VAT-registered and reclaim the VAT on your ad invoices, enter the figure without it. If you are not registered, that VAT is a cost you cannot recover, so include it. The glossary entry on VAT on digital advertising explains how ad invoices are treated.
2. Revenue from those ads. Sales you can attribute to the ads, with VAT removed and refunds taken off. VAT collected from customers is owed to HMRC, so leaving it in inflates every result on this page. Check what your tracking actually sends as conversion value, because many shop setups pass the full order total including VAT and delivery.
3. Gross margin. The share of that ex-VAT revenue left after the cost of the goods or service, delivery, packaging and card processing fees. Do not enter your markup by mistake: a product bought for £60 and sold for £100 has a 40% margin but a 67% markup. The entry on what gross margin includes sets out the costs that belong in it.
4. Fees. What you paid someone to run the ads, plus any software that exists only for the ads, such as a product feed tool or call tracking, for the same period. Leave it at zero to judge the media spend on its own.

What each result means

• ROAS is revenue divided by ad spend. A result of 4.00x means £4 of sales for each £1 the platform charged. It ignores your costs, which is why it can look healthy while you lose money. The glossary has the full definition of return on ad spend.
• Gross profit from the ads is revenue multiplied by your margin: the money available to pay for the advertising and everything else.
• Net return is that gross profit minus ad spend and fees. A minus figure means the ads cost more than they earned in this period.
• ROI is net return divided by everything you put in, ad spend plus fees, shown as a percentage. It is the figure to take to whoever signs off the budget, because it compares with any other use of the same money.
• Break-even ROAS is the ROAS at which net return is exactly zero once fees are counted.

ROAS and ROI answer different questions

ROAS tells you how efficiently spend turned into sales. ROI tells you whether the business is better off. Two shops can both report 4x ROAS: one selling handmade furniture at a 55% margin makes £1.20 for every pound it spends on ads, while one reselling electronics at a 15% margin loses 40p for every pound.

That is why I set ad targets from margin rather than from a ROAS figure someone was told is good. A ROAS with no margin beside it tells you very little about profit.

Break-even ROAS: the number to plan against

With no fees, break-even ROAS is 1 divided by your margin. At a 40% margin it is 2.5x, at 25% it is 4x and at 60% it is about 1.67x. Fees push it higher, because gross profit now has to cover them as well. With the figures already in the form (£5,000 spend, £20,000 revenue, 40% margin, £750 fees) the ROAS is 4.00x, break-even is 2.88x, the net return is £2,250 and the ROI is 39%.

Any target ROAS you set in Google Ads, or ROAS goal in Meta, should sit above break-even by enough to leave the profit you want. Google asks for it as a percentage, so 3.5x is entered as 350%. Set the target at break-even and automated bidding will keep spending right up to the point where the ads earn nothing. If your products carry very different margins, a single target hides that, and reporting profit on ad spend instead of revenue is worth considering.

What this calculator leaves out

• Whether the ads caused the sales. Platforms count orders from people who clicked or saw an ad within a set window, including some who would have bought anyway, such as people searching for your brand name. A test of incrementality is the only way to see how much revenue the ads genuinely added.
• Double counting between platforms. Google and Meta can both claim the same order, so adding their reported revenue together overstates the total. I explain where the gaps come from in why GA4 and Facebook report different conversion numbers. Check the total against the orders in your shop or your accounts.
• Repeat purchases. A first order can lose money while the customer is very profitable over two years. If repeat business matters to you, run the LTV and CAC calculator alongside this one.
• Overheads. Rent, salaries and your own time are not part of gross margin, so a positive net return here is a contribution towards those costs, not pure profit.
• Businesses that sell through enquiries. If the ads produce leads rather than online sales, revenue only exists once work is won, often weeks later. Use the value of jobs actually won from the period’s leads, not the value of quotes sent.

Using the result

If you are comfortably above break-even, the next question is whether more budget would hold the same return, because the last pounds in a budget usually earn less than the first. That drop-off is what marginal ROAS measures. If you are below break-even, check the inputs before blaming the campaigns. A poor ROAS is very often a tracking fault: missing sales, VAT-inclusive values or the same purchase counted twice. If the tracking holds up, look at which campaigns, products or search terms carry the loss.

Reviewing these figures is where my performance marketing work starts, with every paid channel judged against one return target set from your margin. If you would like a second opinion on your own numbers, send me your figures and I will tell you what I would check first.