ROAS (return on ad spend) is calculated by dividing the revenue generated by your ads by what they cost. $5,000 in sales from $1,000 in advertising gives a ROAS of 5, or 500%. Your break-even ROAS, the point where ads stop losing money, equals 1 divided by your margin: 2.5 with a 40% margin.
“Is a ROAS of 4 good?”
The question sounds simple. The only right answer is: it depends on your margin.
A ROAS of 4 makes money for a brand that keeps 60% of every sale. It loses money for a retailer that keeps only 20%. Same number, two realities.
That’s why we never look at a ROAS on its own. This guide gives you the three calculations that matter: the ROAS formula, your break-even ROAS and your target ROAS. Then the mistakes that distort the number, even in a well-run account.
The ROAS formula
ROAS = revenue attributed to your ads ÷ ad spend.
The result is expressed as a ratio (5) or a percentage (500%). Google Ads uses the percentage: according to its help center, aiming for sales five times higher than your ad spend means a target ROAS of 500%.[1] Meta talks about purchase ROAS: the total return on ad spend from purchases attributed to your ads.[2]
Two words matter in this formula:
- Revenue. Sales revenue, excluding taxes and shipping. Google Analytics 4 says so in its documentation: the value of a purchase should include neither shipping nor tax.[3]
- Attributed. The platform decides which sale belongs to which ad, according to its own rules. We come back to this below: it’s often where a ROAS gets inflated.
ROAS says nothing about your profit. It’s a ratio between what comes in and what the advertising costs. To know whether a campaign makes you money, you have to compare it to your margin.
Break-even ROAS: your profitability threshold
Break-even ROAS, or minimum ROAS, is the point where advertising neither makes nor loses you money. The calculation fits on one line.
Break-even ROAS = 1 ÷ margin.
Margin, here, is what you keep from a sale after all variable costs: cost of the product, shipping, packaging, payment fees, returns. Not just the cost of the product.
Here’s an example. The store is fictional: an outdoor gear retailer in Sherbrooke, Quebec.
- Average order: $120 before taxes.
- Variable costs: $54 in products, $15 in shipping and packaging, $3 in payment fees, for a total of $72.
- Margin: $48, or 40% of the order.
- Break-even ROAS: 1 ÷ 0.40 = 2.5. The store can spend at most $48 on advertising per $120 order before it starts losing money.
A few benchmarks to place your own threshold:
- 20% margin: break-even ROAS of 5.
- 30% margin: break-even ROAS of 3.33.
- 40% margin: break-even ROAS of 2.5.
- 50% margin: break-even ROAS of 2.
- 60% margin: break-even ROAS of 1.67.
The thinner your margin, the more advertising has to bring in. That’s math, and no algorithm changes it. Two levers raise ROAS without touching the ads: a better margin, and a website that converts more of the visitors you are already paying for. Learn more: our conversion rate optimization approach.
Target ROAS: the break-even point, plus the profit you want
Break-even ROAS protects you from losses. Target ROAS says what you want to earn. You get it by subtracting your target profit, as a percentage of sales, from your margin.
Target ROAS = 1 ÷ (margin minus target profit).
Back to the fictional store. It wants to keep 10% of every sale after advertising, or $12 per order. So it can spend at most $36 on advertising per order: 1 ÷ (0.40 minus 0.10) = 3.33, a target ROAS of 333%.
That percentage is what you enter in Google Ads. Three precautions, taken from Google’s help center:[1]
- Conversion values first. The Target ROAS strategy requires your conversions to carry a value. Google recommends reporting those values for 4 weeks, or for 1 to 2 conversion cycles if that’s longer, before setting the target.
- Enough volume. For Search and Shopping campaigns, Google requires at least 15 conversions in the past 30 days.
- A realistic target. A target that’s too high may limit the traffic your ads get. To gain volume, Google suggests lowering it gradually.
Two 2026 changes, while we’re at it. Google announced that starting in June 2026, the “Maximize conversion value with a Target ROAS” strategy is simply called “Target ROAS”, with no change in how it works.[1] And since August 17, 2026, Google has been updating its bidding systems for budget-limited campaigns, warning that Target ROAS campaigns may see temporary fluctuations in performance and traffic.[1]
Five mistakes that distort your ROAS
A ROAS takes a second to calculate. An accurate ROAS takes more discipline. Here are the mistakes that distort the number, even in a well-kept account.
- 1. Counting taxes as revenue. In Quebec, the 5% GST and the 9.975% QST both apply to the sale price, adding 14.975%.[4] If your conversion value includes taxes, your ROAS is inflated by as much: a real ROAS of 2.5 shows up as almost 2.87. For the fictional store, the campaign looks profitable when it’s barely breaking even. Google Analytics 4 is clear: no taxes and no shipping in the value of a purchase.[3]
- 2. Adding up the platforms’ ROAS. Each platform claims sales according to its own rules. Google Ads uses data-driven attribution by default.[5] Meta counts purchases that happen within an attribution window after a click on or a view of the ad.[2] The same sale can therefore be claimed by both. The number that counts nothing twice is your blended ROAS: your total revenue divided by all your ad spend.
- 3. Forgetting the sales your tracking no longer sees. Under Quebec’s Law 25, a visitor who declines cookies partly drops out of your reports. Google Ads can model some of those conversions, but only above 700 ad clicks over seven days, per country and domain grouping.[6] Below that threshold, your reported ROAS is underestimated, and you risk cutting a campaign that pays off. Learn more: Consent Mode v2 and Quebec’s Law 25: what your website must do, and what your data no longer tells you.
- 4. Confusing ROAS with profit. ROAS ignores your margins, your fixed costs and the long-term value of a customer. That’s why some teams also track POAS (profit on ad spend): the margin generated, divided by ad spend. At 1, you break even; above 1, advertising makes you money.
- 5. Judging too early. A few days of data is often a handful of sales. Give campaigns time to build up conversions, and compare comparable periods: a sale month doesn’t compare to a slow month.
In B2B: ROAS on sales, not on form fills
If you sell contracts rather than shopping carts, you can still calculate ROAS. You just need to put a value on what happens before the sale.
A filled-in form is worth nothing in itself. What has value is a prospect qualified by your sales team, an SQL, and what it brings in on average. Fictional example: an industrial equipment manufacturer in the Beauce region signs contracts worth $40,000 on average, and one SQL in four becomes a customer. An SQL therefore brings in $10,000 of revenue on average. That’s the value that should flow back into Google Ads, and that’s what ROAS should be calculated on. Learn more: MQL, SQL, SAL: definitions, differences and how to align them.
HubSpot makes the connection easier: it syncs your CRM lifecycle stage changes to Google Ads as conversions.[7] Be aware, though: according to its documentation, updated on October 12, 2026, these native conversions use a fixed value, and the option that used the deal amount is no longer available. Sending actual amounts requires a custom setup.[7] A well-chosen fixed value, such as the average value of an SQL, already lets you steer your campaigns on what matters. Learn more: our HubSpot services.
How we see it
A ROAS only means something next to a margin. At the scoping stage, we set the target ROAS with you, along with what you’re willing to spend to reach it, before launching a single campaign. Then we track blended ROAS, all channels combined, rather than the ROAS each platform claims for itself. Learn more: our performance marketing approach.
We take no commission on the media we buy, and our partners pay us for results, not for showing big numbers. So we have no interest in showing you an inflated ROAS. That’s how we see things, and we won’t change. Learn more: our analytics approach.
One margin. One threshold. One target.
Frequently asked questions
How do you calculate ROAS?
Divide the revenue generated by your ads by what they cost. For example, $5,000 in sales from $1,000 in advertising gives a ROAS of 5, or 500%. Count revenue before taxes and shipping, as Google Analytics 4 documentation requires; otherwise your ROAS looks better than it is.
What is a good ROAS?
A good ROAS is one above your break-even point, which depends on your margin. With a 40% margin, break-even is 2.5: a ROAS of 3 is profitable. With a 20% margin, break-even is 5: the same ROAS of 3 loses you money. There is no universal good ROAS.
How do you calculate break-even ROAS?
Divide 1 by your margin, expressed as a decimal. With a 40% margin, break-even ROAS is 1 ÷ 0.40, or 2.5. The margin must account for all the variable costs of a sale: product, shipping, packaging, payment fees and returns. Below that threshold, every sale won through advertising costs you money.
What is the difference between ROAS and ROI?
ROAS compares revenue to ad spend only. ROI, or return on investment, compares profit to all costs: products, advertising, tools, salaries. A ROAS of 4 can hide a negative ROI if your margins are thin. ROAS is for steering campaigns; ROI is for judging the profitability of the business.
How do you set a target ROAS in Google Ads?
First calculate your target ROAS: 1 divided by your margin minus your target profit. With a 40% margin and a 10% target profit, it’s 3.33, or 333%. Enter that percentage in the Target ROAS bid strategy. Google requires conversion values and, for Search and Shopping campaigns, at least 15 conversions in 30 days.
Sources
- ↑ a b c d Google, “About Target ROAS bidding“, Google Ads Help, accessed October 16, 2026 (no update date on the page).
- ↑ a b Meta, “Ad Account Insights“, Meta Marketing API documentation, accessed October 16, 2026 (purchase_roas field: “total return on ad spend (ROAS) from purchases”; action_attribution_windows parameter).
- ↑ a b Google, “Recommended events“, Google Analytics, Google for Developers, accessed October 16, 2026 (purchase event: “Don’t include shipping or tax”).
- ↑ Revenu Québec, “Calculating the Taxes“, Revenu Québec, accessed October 16, 2026. The displayed ROAS of 2.87 is calculated by Sekoia: 2.5 × 1.14975 = 2.874.
- ↑ Google, “First click, linear, time decay, and position-based attribution models are going away“, Google Ads Help, announcement of April 2023, accessed October 16, 2026.
- ↑ Google, “About consent mode modeling“, Google Ads Help, accessed October 16, 2026.
- ↑ a b HubSpot, “Create and sync ad conversion events with your Google Ads account“, HubSpot Knowledge Base, updated October 12, 2026 (“Native Google Ads lifecycle stage conversion events use a fixed value”).