Are your ads
actually working?
ROAS is easy to calculate and easy to misread. A 3x return sounds healthy until you account for your margin — this shows you both numbers, and the point where you stop making money.
Your numbers
$
$
What is left after cost of goods — this is what makes ROAS real
What it means
ROAS
—
Revenue for every dollar of ad spend.
ROAS after margin
—
The one that matters. Revenue is not profit.
Break-even ROAS
—
Below this, your ads lose money once cost of goods is paid.
Verdict
—
Your actual return against the point where you break even.
ROAS counts revenue, not profit — which is why a 3x return on a 25% margin is actually losing money once cost of goods is paid. Break-even ROAS is 1 divided by your margin. This also ignores overheads, returns and the cost of servicing the customer, so treat the verdict as directional.