---
title: "How to calculate ROAS: formula and examples | Product Metrics"
description: "Calculate ROAS as revenue from ads ÷ ad spend. See a worked example, what to count (VAT, returns, spend) and how to read it against break-even."
canonical: "https://www.productmetrics.io/blog/how-to-calculate-roas"
pageType: article
language: en
publisher: "Product Metrics"
author: "Berend Vrakking"
datePublished: 2026-10-07
dateModified: 2026-10-08
image: "https://www.productmetrics.io/og/blog/how-to-calculate-roas.png"
---

> Content index: https://www.productmetrics.io/llms.txt

# How to calculate ROAS: formula and examples

## Key takeaways

- ROAS is revenue from ads ÷ ad spend: for example, €8,000.00 of revenue from €2,000.00 of ads is 4.0, which is also written 4:1 or 400%.
- Count revenue excl. VAT and after returns, and only the ad spend behind it. The same month reads 4.84, 4.0 or 3.8 depending on what you count.
- Calculate ROAS per product as well as per account: an account ROAS of 4.0 can blend one product at 6.0 with another at 2.0.
- Read the result against break-even ROAS, 1 ÷ contribution margin: a 4.0 ROAS is a profit at a 35% margin (break-even 2.9) and a loss at a 20% margin (5.0).

To calculate ROAS, divide the revenue your ads brought in by what the ads cost. That is the whole formula, and it takes ten seconds. The slow part is deciding which revenue and which spend go into it, because VAT, returns and what you count as ad spend each move the answer.

Below, one month of a shop's ads is worked through in euros. Depending on what you count, it reads 4.84, 4.0 or 3.8, and each product is then judged against its own break-even. The [ROAS glossary entry](https://www.productmetrics.io/glossary/roas) has the short definition, and the [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator) takes your own figures.

## What is the ROAS formula?

ROAS (return on ad spend) is revenue from ads divided by the ad spend that produced it. Say a shop spends €2,000.00 on ads in a month and records €8,000.00 of revenue from them: €8,000.00 ÷ €2,000.00 = 4.0. Every €1.00 of ads brought in €4.00 of revenue.

The same result is written three ways, depending on the tool:

| Written as | How you get it | Meaning |
|---|---|---|
| 4.0 (or 4) | revenue ÷ ad spend | €4.00 of revenue per €1.00 of ads |
| 4:1 | the same ratio | 4 parts revenue to 1 part spend |
| 400% | ratio × 100 | the same, as a percentage |

Google Ads Help describes [target ROAS](https://support.google.com/google-ads/answer/6268637) as a percentage: sales ÷ ad spend × 100%.

## Count revenue excl. VAT and after returns

The ROAS formula takes whatever revenue you give it. Two common mistakes make the number look better than it is, and neither shows up as an error.

**VAT.** Your margin and break-even ROAS are worked out on prices excl. VAT, because the VAT goes to the tax office, not to you. So ROAS has to use revenue excl. VAT too. If Google Ads records conversion values incl. VAT, the same month looks better than it was: at 21% VAT, €8,000.00 of revenue shows as €9,680.00, and €2,000.00 of ad spend reads as a ROAS of 4.84 instead of 4.

**Returns.** Google Ads counts an order as a conversion when it is placed, and keeps counting it if the customer sends it back. Take the refunds and cancellations for the period off the revenue: if €400.00 of the €8,000.00 came back, ROAS is €7,600.00 ÷ €2,000.00 = 3.8.

With both corrections the month is a ROAS of 3.8, while the ad account can show 4.84.

**Figure: One month of ads, three ROAS figures depending on what is counted.** Each bar is the ROAS of the same month, counted a different way. It reads 4.84 with VAT in the conversion value, 4 without it and 3.8 after returns, which is the figure to compare with break-even.

| Revenue counted | ROAS for the month |
| --- | --- |
| Incl. 21% VAT | 4.84 |
| Excl. VAT | 4 |
| Excl. VAT, after returns | 3.8 |

_Source: Illustrative data. Calculated as conversion value ÷ ad spend: €9,680.00 ÷ €2,000.00, €8,000.00 ÷ €2,000.00 and €7,600.00 ÷ €2,000.00_

Return rates differ by category, so the gap between reported and kept ROAS differs by product too. A product group that comes back in the post a lot will report a ROAS it never keeps. [Ecommerce return rate](https://www.productmetrics.io/blog/ecommerce-return-rate) shows how to work out yours and what it does to break-even.

**Figure: How returns lower an account's ROAS of 4.** The line is the ROAS left of an account that reads 4 before returns. Every 5% of revenue that comes back takes 0.2 off, so a shop with a 20% return rate is left with a ROAS of 3.2.

| Share of revenue returned | ROAS after returns |
| --- | --- |
| 0% | 4 |
| 5% | 3.8 |
| 10% | 3.6 |
| 15% | 3.4 |
| 20% | 3.2 |

_Source: Calculated as 4 × (1 − return rate)_

> **Sidenote:** Shipping you charge customers can count as revenue or be left out. Pick one and use the same choice in the margin you compare with.

## Count only the spend behind that revenue

Ad spend is the media cost of the campaigns whose revenue you counted, for the same dates. Divide Shopping revenue by the cost of Shopping, Performance Max and brand search together and you get a number that describes none of them.

Agency fees and software don't belong in the ROAS of a campaign. If you want the full cost of running ads, add them and call the result ROAS after fees. Label which one you report, so next month compares like with like.

Orders also arrive days after the click, so the last few days of any period under-report. Compare full weeks rather than yesterday.

## An account ROAS hides its products

An account ROAS is an average, and averages are good at keeping secrets. Split the same €2,000.00 evenly over two products. Product A earned €6,000.00 from €1,000.00 (a ROAS of 6.0) and Product B earned €2,000.00 from €1,000.00 (2.0). The account shows €8,000.00 ÷ €2,000.00 = 4.0, a figure neither product comes near.

**Figure: ROAS of two products and of the account they make up.** Each bar is a ROAS. The account's 4 is the blend of Product A at 6 and Product B at 2, each on €1,000 of ad spend, and the account figure alone doesn't show the gap.

| Product or account | ROAS (revenue ÷ ad spend) |
| --- | --- |
| Product A | 6 |
| Product B | 2 |
| Account | 4 |

_Source: Illustrative data. Calculated as revenue ÷ ad spend: €6,000.00 ÷ €1,000.00, €2,000.00 ÷ €1,000.00 and €8,000.00 ÷ €2,000.00_

With only a handful of clicks, one order can move a product's ROAS from 0 to 10, so judge the products that have enough clicks and group the rest until they do.

For one product, divide its conversion value by its own ad cost. Doing the Product A and Product B sum for thousands of products is slow by hand, and [Product Segmentation](https://www.productmetrics.io/product-segmentation) runs it for every product: Product Metrics ML places each one in one of six segments by its ad clicks and its return, where return is ROAS or POAS, working from the revenue and spend your ad account reports.

## Read every ROAS against its own break-even

A ROAS is only good or bad against the product's break-even ROAS, which is 1 ÷ [contribution margin](https://www.productmetrics.io/glossary/contribution-margin). Contribution margin is the share of the price (excl. VAT) left after cost of goods and the variable costs of the order. A 25% margin gives 1 ÷ 0.25 = 4.0. The [margin calculator](https://www.productmetrics.io/margin-calculator) gives a product's contribution margin from its cost, price and order costs.

**Figure: The ROAS a product needs to break even, by contribution margin.** Each bar is the ROAS a product with that contribution margin needs to break even. It halves as the margin doubles: a 25% margin needs a ROAS of 4 and a 50% margin needs 2.

| Contribution margin | ROAS needed to break even |
| --- | --- |
| 20% | 5 |
| 25% | 4 |
| 30% | 3.3 |
| 40% | 2.5 |
| 50% | 2 |

_Source: Calculated as 1 ÷ contribution margin_

In profit terms, POAS = ROAS × contribution margin, and break-even POAS is 1.0. [POAS vs ROAS](https://www.productmetrics.io/blog/poas-vs-roas) explains when to use which.

Back to the two products. Product A has a 40% margin, so it breaks even at 2.5 and its 6.0 clears the line easily. Product B has a 20% margin and needs 5.0, so its 2.0 loses money. In euros, A keeps €2,400.00 on €1,000.00 of ads (+€1,400.00) and B keeps €400.00 (−€600.00). The account keeps +€800.00 and reads 4.0 against a blended break-even of 2.9. It looks healthy, and €600.00 of that month's loss sits inside it.

**Figure: The ROAS each product and the account gets, against the ROAS each needs.** Each row has two bars: the ROAS it gets and the ROAS it needs to break even. The account gets 4 against a break-even of 2.9 and looks healthy, while Product B gets 2 and needs 5.

| Product or account (contribution margin) | ROAS it gets | ROAS needed to break even |
| --- | --- | --- |
| Product A (40%) | 6 | 2.5 |
| Product B (20%) | 2 | 5 |
| Account (35%) | 4 | 2.9 |

_Source: Illustrative data. Break-even calculated as 1 ÷ contribution margin: 40% for Product A, 20% for Product B and 35% blended for the account_

Product B has two ways out. Its ROAS has to reach 5.0, or its margin has to reach 50%, because at a ROAS of 2.0 break-even is 1 ÷ 2.0. A better price or lower variable costs move the margin, and lowering its priority limits the loss while you work on it.

Products above break-even are candidates to increase priority. [What is a good ROAS](https://www.productmetrics.io/blog/what-is-a-good-roas) answers "is 4 good?" for different margins, and [break-even ROAS per product](https://www.productmetrics.io/blog/break-even-roas-per-product) covers the four steps.

The VAT basis moves break-even as well as ROAS, so a 4.84 incl. VAT and a 4.0 excl. VAT can describe the same product on the same day:

**Figure: The ROAS needed to break even, with conversion values excl. and incl. 21% VAT.** Each pair of bars is the ROAS a product with that margin needs to break even, without and with 21% VAT in the conversion value. At a 25% margin that is 4 excl. VAT and 4.84 incl. VAT, so compare a ROAS with a break-even on the same basis.

| Contribution margin | ROAS needed, values excl. VAT | ROAS needed, values incl. 21% VAT |
| --- | --- | --- |
| 20% | 5 | 6.05 |
| 25% | 4 | 4.84 |
| 30% | 3.33 | 4.03 |
| 40% | 2.5 | 3.03 |

_Source: Calculated as 1 ÷ contribution margin, and × 1.21 for the incl. VAT reading_

The [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator) takes revenue incl. VAT with a VAT rate and works out ROAS and break-even on that basis. If your conversion values exclude VAT, enter revenue excl. VAT and set VAT to 0%.

## ROAS, POAS and ROI on the same account

All three divide by ad spend; only the top line changes. ROAS counts revenue, POAS counts contribution margin, and ROI on ad spend counts what is left after the ads. Here they are for the two-product account above, at a blended 35% margin: €8,000.00 of revenue excl. VAT is €2,800.00 of contribution margin.

| Metric | Formula | This account | Break-even |
|---|---|---|---|
| ROAS | revenue ÷ ad spend | 4.0 | 2.9 (1 ÷ 35%) |
| POAS | contribution margin ÷ ad spend | 1.4 | 1.0 |
| ROI on ad spend | (contribution margin − ad spend) ÷ ad spend | 40% | 0% |

Illustrative data. POAS equals ROAS × margin (4 × 0.35 = 1.4), and ROI equals POAS − 1. The [marketing ROI](https://www.productmetrics.io/glossary/marketing-roi) entry explains the profit-based measure. Total revenue over total marketing spend is a different ratio again: see [marketing efficiency ratio vs ROAS](https://www.productmetrics.io/blog/marketing-efficiency-ratio-vs-roas).

## Four inputs that skew the number

When a ROAS looks wrong, check these before you question the maths:

| Mistake | What it does to the number |
|---|---|
| Mixing VAT bases | Revenue incl. VAT set against a margin excl. VAT makes every product look 21% better at a 21% VAT rate (4.84 instead of 4.0). |
| Mixing campaigns or dates | Shopping revenue over spend on every campaign, or a week of revenue against a month of spend, measures nothing in particular. |
| Judging against a benchmark | An industry average blends shops with other margins. Your own break-even is the number to check. |
| Reading a single day | Conversion lag leaves the latest days incomplete, so yesterday's drop often fills in later. |

ROAS also counts only the revenue your ad account reports. It can't show which of those sales would have happened without the ads, which is what [incrementality](https://www.productmetrics.io/glossary/incrementality) measures. [Incrementality testing](https://www.productmetrics.io/blog/incrementality-testing) shows how to measure it with a holdout or geo split.

## Calculate yours in five steps

Do the sum once per product you care about, then once for the account. I'd start with the best sellers: they take most of the budget, so a wrong reading costs most there.

**Calculate your ROAS in five steps**

1. **Choose the campaigns and dates.** Use full weeks, and take revenue and ad spend from the same campaigns for the same period.
2. **Take the conversion value excl. VAT.** If your account records VAT, divide by 1.21 at a 21% rate to get revenue excl. VAT.
3. **Subtract returns and cancellations.** Remove the value of orders refunded or cancelled in the same period.
4. **Divide by the ad spend.** For example, €7,600.00 ÷ €2,000.00 = 3.8. If you add agency or software fees, call the result ROAS after fees.
5. **Compare with break-even.** Divide 1 by the product's contribution margin. A ROAS above that number makes a profit before fixed costs.

If the result is under break-even, check the VAT basis, the returns and the spend you counted before you touch a campaign.

## Finish with profit per euro of ads

Comparing a product's ROAS with its break-even tells you whether it makes money. To see how much, multiply its ROAS by its contribution margin. The result is POAS, profit on ad spend: the contribution profit each €1.00 of ads brings back.

- Product A: 6 × 40% = a POAS of 2.4. Every €1.00 of ads brings €2.40 of contribution profit, €1.40 more than it cost.
- Product B: 2 × 20% = a POAS of 0.4. Every €1.00 of ads brings €0.40 back, so it loses €0.60.

A POAS above 1 makes money and below 1 loses it, whatever the product's margin, so one number works for every product. [POAS vs ROAS](https://www.productmetrics.io/blog/poas-vs-roas) explains when to steer by POAS instead of ROAS. The [break-even ROAS calculator](https://www.productmetrics.io/break-even-roas-calculator) handles one product at a time, and [Product Segmentation](https://www.productmetrics.io/product-segmentation) shows every product at once: it works on ROAS straight away and switches to POAS once you connect margins.

Run that sum for your ten biggest spenders before you change a single target.

## Frequently asked questions

### Is a ROAS of 4 good?

Only if the product's contribution margin is above 25%. Break-even ROAS is 1 ÷ margin, so 4.0 is exactly break-even at a 25% margin. At 35% it makes a profit (break-even 2.9), and at 20% it makes a loss (break-even 5.0).

### What is a good ROAS ratio?

One above the product's own break-even ROAS. A 4:1 ratio makes a profit on a product with a 50% margin (break-even 2.0) and a loss on one with a 20% margin (break-even 5.0), so no single ratio is good for every shop.

### How do I turn a ROAS percentage into a ratio?

Divide by 100. A ROAS of 400% is 4.0, or 4:1. To go the other way, multiply the ratio by 100: Google Ads Help gives target ROAS as a percentage in this way, with $5 of sales ÷ $1 of ad spend × 100% = 500%.

### Does ROAS include VAT?

ROAS includes whatever VAT is in your conversion values. Use one basis for revenue and for break-even, because margin is worked out excl. VAT. At 21% VAT and a 25% margin, break-even is 4.0 excl. VAT and 4.84 incl. VAT. The calculator takes revenue incl. VAT with a VAT rate, and if your conversion values exclude VAT you enter revenue excl. VAT and set VAT to 0%.

---

Written by Berend Vrakking, founder of Product Metrics. Last updated 2026-10-08.

HTML version: https://www.productmetrics.io/blog/how-to-calculate-roas