AI Paid Ads ROAS Calculator

What the calculator tells you

Return on ad spend (ROAS) is attributed revenue divided by ad spend. It says how much revenue the platform credits to each pound of advertising. It does not say whether you made money, because it ignores what the product cost you.

Enter three numbers:

• • Ad spend for the period.
• • Attributed revenue for the same period, ideally from your shop or finance system rather than the ad platform alone.
• • Gross margin %: revenue minus the variable cost of fulfilling it (product cost, shipping, payment fees and a returns allowance), as a percentage of revenue.

Calculator

ROAS and break-even calculator

Check whether ad revenue is profitable once your gross margin is taken into account.

Ad spend (£)Revenue attributed to the ads (£)Gross margin (%)

The starting figures are illustrative round numbers, not AfM prices or client results. Replace them with yours.

ROAS

3.00x

Attributed revenue divided by ad spend

Break-even ROAS

2.50x

1 divided by gross margin: below this, the ads lose money before any other cost

Contribution after ad spend

£1,000

Revenue × margin, minus ad spend

Assumptions

• Attributed revenue depends on the attribution model; platform-reported revenue often overlaps between channels.
• Contribution excludes fees, returns, fulfilment you have not counted in margin, and overheads.

The calculator returns three figures:

1. • ROAS = revenue ÷ spend.
2. • Break-even ROAS = 1 ÷ gross margin. Below this, every sale the ads produce costs more in advertising than it earns in margin.
3. • Contribution after ad spend = revenue × margin − spend. This is the money left to pay fixed costs and make a profit.

Worked example

This is an illustrative example with round, hypothetical figures, not a client result.

Assumptions: an online shop spends £2,000 on ads in a month. The platform attributes £8,000 of revenue. After product cost, packaging, shipping, payment fees and a returns allowance, the shop keeps 40% of each pound of revenue, so gross margin is 40%. Revenue is stated excluding VAT.

Step 1, ROAS. £8,000 ÷ £2,000 = 4.0 (sometimes shown as 400%).

Step 2, break-even ROAS. 1 ÷ 0.40 = 2.5. At a ROAS of 2.5, £2,000 of spend would bring £5,000 of revenue, and 40% of £5,000 is exactly £2,000: the margin just pays for the ads.

Step 3, contribution after ad spend. £8,000 × 0.40 = £3,200 of margin. £3,200 − £2,000 = £1,200 left over.

Same ROAS, different margin. If the margin were 25% instead, break-even ROAS would be 1 ÷ 0.25 = 4.0. The same ROAS of 4.0 would then leave £8,000 × 0.25 − £2,000 = £0. Identical dashboards, very different businesses.

VAT trap. Many shop platforms pass revenue to ad platforms including VAT. If the £8,000 above included 20% UK VAT, revenue excluding VAT is £8,000 ÷ 1.2 = £6,666.67. True ROAS is then £6,666.67 ÷ £2,000 = 3.33, and contribution is £6,666.67 × 0.40 − £2,000 = £666.67, a little over half the figure from step 3. Check which revenue figure your conversion tracking sends.

Setting a target ROAS from your margin

Google describes Target ROAS as the average conversion value you want for each unit of currency spent (Google Ads Help). The platform will try to hit whatever number you give it, so derive the number from your economics:

Target ROAS = 1 ÷ (gross margin − profit you want to keep, both as a share of revenue).

Continuing the example: with a 40% margin, if you want 15% of revenue left as contribution after ads, the ads may consume 25% of revenue. Target ROAS = 1 ÷ 0.25 = 4.0.

Three adjustments before you type that number into a platform:

• • Platform attribution is generous. Each platform credits itself, and totals across platforms usually exceed real revenue. If your finance numbers show the platforms over-claim by, say, a fifth, set targets higher to compensate.
• • Repeat purchase changes the answer. If a first order is typically followed by further orders, a first-order ROAS below break-even can still be profitable over twelve months. Only use lifetime value you can evidence from your own order history.
• • Brand search distorts the blend. Campaigns on your own brand name capture people who already intended to buy. They show very high ROAS that says little about the ability to find new customers.

A real example, read carefully

The Mumshandmade case study (a premium handmade knitwear brand, 27 September 2024 to 23 January 2025, work Jakub delivered as a freelance consultant before founding AfM) records a 4.72X peak weekly Meta ROAS, reached in week 12 and reported by Meta, and 34.17X ROAS on the Google brand search campaign from its December 2024 launch, reported by Google.

Three cautions apply to reading those figures, and they are the same cautions this calculator is built to teach:

• • 4.72X is a single-week peak, not an average. The same record says weekly Meta ROAS fell back below 2X by week 15 as spend scaled.
• • Both are platform-reported. Each platform applies its own attribution rules, so neither figure is the shop's own revenue divided by spend.
• • 34.17X comes from brand search, which converts people already looking for the brand, many of them introduced by the Meta campaigns. It reflects existing demand being collected, not the cost of creating new demand.

The case record does not state the brand's gross margin, so it cannot tell you whether a given ROAS was above break-even. That is exactly the missing input the calculator asks you for.

When ROAS is the wrong metric

For lead generation there is no revenue at the moment of conversion, so ROAS is not directly available. Use cost per qualified lead and cost per opportunity instead: the B2B lead generation cost calculator works those out. For subscription businesses, compare the ad cost of acquiring a customer with the gross margin that customer produces over the period you can evidence.

If you would like a second view of your numbers, the free written breakdown works from public information and any figures you choose to share.

FAQ

What is a good ROAS?

There is no universal good figure. A good ROAS is one comfortably above your own break-even ROAS, which is one divided by your gross margin. A business on 60% margin breaks even at about 1.67; one on 20% margin needs 5.0.

Is ROAS the same as ROI?

No. ROAS divides revenue by ad spend. ROI compares profit with the full cost, including product costs and usually people and tools. A campaign can show a ROAS above 1 and still have a negative ROI.

Should gross margin include shipping and returns?

For this calculation, yes. Use the margin left after every cost that rises with each order: product, packaging, shipping, payment fees and an allowance for returns. Leaving them out makes break-even ROAS look lower than it is.

Why does my shop show less revenue than the ad platforms combined?

Each platform counts conversions it touched under its own attribution rules, so the same sale can be claimed by more than one platform. Your shop or finance system counts it once, which is why it is the better denominator for profit decisions.