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How do you calculate your target Return on Ad Spend?

Asked 3 years ago

How would I go about calculating my target ROAS? Does it depend on profit margin or are there other factors involved? Is there a formula I can use or maybe an online calculator?

Lane Cooper

Wednesday, October 20, 2021

The formula for calculating the return on ad spend is, dividing revenue by the ads spent for a given period. There are online calculators like BeProfit's app, WebFx, and many more. Factors like profit margin should be considered because they help you determine your ROAS goal. The higher your profit margin the lower your ROAS goal and, the smaller your profit margin the higher your ROAS goal.

Maurice Mullen

Wednesday, February 09, 2022

To calculate the average return on ad spending:

  1. First, determine the amount you spent on ads called ad spend.
  2. Next, calculate the amount you earned from the products sold due to these ads called revenue.
  3. Divide Revenue by ad spends to get ROAS.

To further understand, consider this calculation example:

  • Ad Spend= $500
  • Revenue= $1000
  • ROAS= 1000÷500=$2

Please note that the greater the profit margin, the lower is the ROAS gaol. In general, ROAS golden rule is $3.

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