What is the formula to calculate ROAS?

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