What is the formula to calculate ROAS?
Asked 2 years ago
Hey guys, I'm looking for an easy formula I can follow. Does anyone here have one?
Curt Cleveland
Friday, May 06, 2022
Investing less money on ads with better targeting instead of spending more money on untargeted audiences will improve ROAS. You can calculate break-even ROAS. It is a value that estimates the maximum ROAS that can be profitable.
To calculate break-even ROAS, first, calculate gross profit margin by:
- Deducting variable costs from the average order value.
- Dividing the value by your average order value.
- Now calculate ROAS by dividing gross profit margin by 1.
Mathematically, it can be written as:
Break-Even ROAS = 1 / Gross Profit Margin
Here is the formula of gross profit margin:
Gross Profit Margin = (Average Order Value - Variable Costs) / Average Order Value
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