Plain answer
ROAS (return on ad spend) measures how much revenue your ads bring in for every dollar they cost. Divide the revenue your ads generated by what you spent. A ROAS of 4 means $4 back for every $1 in. It's the fastest way to tell whether your advertising makes money.
How ROAS actually works
The math is one division: revenue from ads ÷ cost of ads. Spend $1,000, get $4,000 in tracked sales, and your ROAS is 4.0 — often written as 4:1 or 400%.
The catch isn't the math. It's the word "from." Your ad platform only counts revenue it can trace to an ad through conversion tracking. If your tracking misses phone orders or repeat purchases, your real ROAS is higher than the dashboard says. If the platform takes credit for people who would have bought anyway, it's lower.
What's a good ROAS?
There's no universal number, because the answer lives in your margins. Work it backwards: if you keep 50 cents of gross profit on every dollar of revenue, you break even at a ROAS of 2.0. Anything above that is profit. A software business with fat margins can celebrate a 3; a retailer with thin margins might lose money at the same 3.
Know your break-even ROAS: 1 ÷ gross margin. That one number turns the dashboard from a scoreboard into a decision.
Field note from TomasThe best ROAS lessons I've had came from $1M+/year accounts. At that size, nobody asks how to scale — the whole job is making the account extremely efficient, because a 1% improvement is real money. Smaller accounts should steal that mindset: chase the single-digit-percent gains and the return takes care of itself.
ROAS vs ROI: what's the difference?
ROAS compares revenue to ad spend only. ROI (return on investment) compares profit to all costs — the product, the shipping, the software, the people. ROAS tells you whether a campaign is worth scaling. ROI tells you whether the whole operation is worth running. Platforms report ROAS because it's the number they can see. Your accountant cares about ROI.
What this means for your ads
Two habits matter:
- Fix tracking before judging results. A "failing" campaign with broken tracking is a coin flip, not a verdict.
- Compare every campaign's ROAS to your break-even number, not to a benchmark someone published for a different business. The campaigns above the line get more budget. The ones below it get fixed or killed.
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