- A good ROAS is any ROAS above your break-even ROAS, which is 1 divided by your gross margin: 2.5 at a 40% margin, 5.0 at 20%.
- The same ROAS can make money for one brand and lose it for another, because margins differ.
- Average ROAS hides the last pound: check marginal ROAS before raising a budget.
- POAS (gross profit ÷ ad spend) and MER (total revenue ÷ total marketing spend) judge spend on what reaches the bank, not on what the platform claims.
A good ROAS is any ROAS above your break-even ROAS, and break-even ROAS is 1 divided by your gross margin. If you keep 40p of every pound of sales after the cost of the goods or service, you need £2.50 of sales for every £1 of ad spend just to cover the media; below that, the ads lose money before a penny of overheads. So there is no universal good number: a ROAS of 4 is healthy at a 50% margin and loss-making at 20%.
How to calculate break-even ROAS
ROAS (return on ad spend) is the revenue attributed to ads divided by what the ads cost. Google shows target ROAS as a percentage: £5 of sales from £1 of spend is a 500% target ROAS (Google Ads Help). Meta and most reports show the same thing as a ratio, 5.0 or 5:1. This guide uses ratios.
You do not need a return on ad spend calculator to find your break-even point. Start with gross margin after every cost that rises with each sale: the goods or the cost of delivering the service, packaging and shipping, payment fees, returns and any sales commission. Work ex VAT throughout.
Break-even ROAS = 1 ÷ gross margin
Target ROAS = 1 ÷ (gross margin − the share of revenue you want left after ad spend)
Example with made-up numbers. Say a retailer sells a product for £100 ex VAT. The goods cost £45, packaging and delivery £8, payment fees £2, and returns average £5 an order. Variable costs are £60, so the gross margin is 40% and break-even ROAS is 1 ÷ 0.40 = 2.5. If the business wants 10% of revenue left after ad spend to cover overheads and profit, its target ROAS is 1 ÷ (0.40 − 0.10) = 3.33.
| Gross margin | Break-even ROAS | In Google's format | Target ROAS to keep 10% of revenue after ad spend |
|---|---|---|---|
| 20% | 5.00 | 500% | 10.00 |
| 30% | 3.33 | 333% | 5.00 |
| 40% | 2.50 | 250% | 3.33 |
| 50% | 2.00 | 200% | 2.50 |
| 60% | 1.67 | 167% | 2.00 |
| 70% | 1.43 | 143% | 1.67 |
For a services or lead-generation business the logic is the same, but the revenue has to be real: use the value of sales that closed in the CRM and the margin on those jobs, not a guessed value per enquiry.
Two UK traps
- VAT in the conversion value. If your tag sends the basket total including 20% VAT, every ROAS figure on standard-rated goods is overstated by a fifth. Send the ex-VAT value, or adjust your break-even figure to match.
- Revenue that does not stick. Refunds, cancellations and no-shows count in the platform the moment the conversion fires. Measure against net sales.
Why a ROAS target means little without margin
ROAS tells you how much revenue came back. It says nothing about how much of that revenue you keep. Two brands in the same group show why.
Example with made-up numbers.
| Same month, same spend | Brand A | Brand B |
|---|---|---|
| Ad spend | £10,000 | £10,000 |
| Attributed revenue | £60,000 | £35,000 |
| ROAS | 6.0 | 3.5 |
| Gross margin | 25% | 60% |
| Gross profit | £15,000 | £21,000 |
| Gross profit after ad spend | £5,000 | £11,000 |
| POAS (gross profit ÷ ad spend) | 1.5 | 2.1 |
Judged on ROAS, Brand A wins and gets the next pound. Judged on gross profit, Brand B makes more than twice as much from the same spend. If one agency runs Brand A and another runs Brand B, each reporting against its own ROAS target, nobody sees it.
Three more reasons ROAS misleads on its own:
- It is the platform's claim. Google and Meta each count sales by their own rules and often count the same sale twice, so platform ROAS figures added together can credit ads with more revenue than the business made. Our guide to cross-channel attribution shows how to reconcile them with recorded sales.
- It rewards the easy sales. Brand search and retargeting show high ROAS because they reach people already on their way to buy. Some of those sales would have happened without the ad.
- It ignores the product mix. A campaign that sells more low-margin lines can raise ROAS and lower profit at the same time.
This is a finance problem as much as a marketing one. In Gartner's 2024 survey of 378 senior marketing leaders, only 52% said they had proved marketing's value and received credit for it, and CFOs were the executives they most often named as doubtful (Gartner). A ROAS figure with no margin behind it gives a finance director little reason to trust the number.
Do you want ROAS to be high or low?
A high ROAS is better for any single pound. But ROAS is usually highest at low spend, because the first sales are the easiest, so chasing it can shrink profit. The figure that tells you whether to spend more is marginal ROAS: the extra revenue from the extra spend.
Example with made-up numbers, for a business with a 40% margin and a break-even ROAS of 2.5:
| Monthly spend | Revenue | Average ROAS | Marginal ROAS on the extra £5,000 | Gross profit after ad spend |
|---|---|---|---|---|
| £10,000 | £50,000 | 5.00 | n/a | £10,000 |
| £15,000 | £65,000 | 4.33 | 3.0 | £11,000 |
| £20,000 | £75,000 | 3.75 | 2.0 | £10,000 |
At £20,000 the average ROAS of 3.75 still looks comfortably above break-even, yet the last £5,000 returned only 2.0 and lost £1,000 of gross profit. The best budget here is about £15,000, where ROAS is lower than at £10,000 but gross profit is highest. You find marginal ROAS by changing budgets in steps and measuring the extra sales in your own records.
POAS and MER: judging spend on gross profit
POAS (profit on ad spend) is the gross profit from ad-driven sales divided by ad spend. Break-even is always 1.0, whatever the margin, which makes it comparable across brands, products and channels. A POAS of 1.5 means each £1 of media brought back £1.50 of gross profit, 50p more than it cost.
MER (marketing efficiency ratio) is total revenue divided by total marketing spend, across every channel, with no attribution at all. It cannot be double counted, which makes it a good check on the sum of the platform claims, but it cannot tell you which channel did the work. Its profit version, total gross profit divided by total marketing spend, is the one to show a board.
| Measure | Formula | Break-even | Best for | Blind spot |
|---|---|---|---|---|
| ROAS | Attributed revenue ÷ ad spend | 1 ÷ gross margin | Comparing campaigns with similar margins in one platform | Ignores margin; counted by the platform |
| POAS | Attributed gross profit ÷ ad spend | 1.0 | Moving budget between brands, products and channels | Needs cost data per sale; still relies on attribution |
| MER | Total revenue ÷ total marketing spend | 1 ÷ blended gross margin | Checking marketing as a whole pays back | Says nothing about which channel worked |
| Marginal ROAS | Extra revenue ÷ extra spend | 1 ÷ gross margin | Deciding whether to raise or cut a budget | Takes budget changes and time to measure |
Putting gross profit into the ad platforms
- Google Ads lets you set conversion values to revenue, profit or customer lifetime value (Google Ads Help). Send gross profit as the value, for example by importing it from your CRM, and target ROAS becomes, in effect, a target POAS. Retailers can also send cart data and add cost of goods sold in Merchant Center to report gross profit by product (Google Ads Help).
- Meta optimises on the value you send through the pixel and Conversions API, so the same principle applies. PPC Land reported in June 2025 that Meta was testing optimisation based on profit margin (PPC Land).
Google's own data suggests that bidding on value pays: advertisers that moved from target CPA to target ROAS saw a median 14% more conversion value at a similar ROAS (Google internal data, March 2021, Google). That is a platform describing its own product, but the principle stands: the bidding chases whatever value you give it, so give it gross profit.
ROAS vs ROI: how to measure marketing ROI
ROAS is not ROI. ROAS compares revenue with ad spend. ROI compares the profit marketing made with everything it cost, including agency fees, tools and the goods themselves. Owners tend to ask the ROI question in plainer words: did the ads pay for themselves?
| ROAS | Marketing ROI | |
|---|---|---|
| Compares | Revenue with ad spend | Profit with the full marketing cost |
| Counts as cost | Media only | Media, agency and freelance fees, tools |
| Takes off revenue | Nothing | Cost of goods or delivery |
| Answers | Is this campaign bringing in revenue efficiently? | Did marketing make the business money? |
Example with made-up numbers. Say a business spends £20,000 a month on media and £3,000 on agency fees, and recorded sales from those ads come to £80,000 at a 40% gross margin. ROAS is 4.0, which sounds strong. Gross profit is £32,000; after £23,000 of media and fees, marketing made £9,000, a marketing ROI of 39%. Drop the margin to 25% and the same ROAS of 4.0 produces £20,000 of gross profit and a £3,000 loss.
The figures only mean something if the sales are recorded ones, not the platforms' claims added together. In Marketing Week's 2025 Language of Effectiveness survey of more than 1,000 brand-side marketers, 60% said they do not measure whether their work delivers business outcomes (Marketing Week). Measuring ROI on gross profit from recorded sales puts a business in the minority that does.
What is a good ROAS for Google Ads and Facebook ads?
The honest answer is the same for both: above your break-even ROAS, measured on recorded sales, ex VAT and net of refunds. Published benchmark figures average businesses with different margins, prices and tracking, so they cannot tell you whether your own spend is profitable.
What differs by channel is where it sits in the buying journey. Brand search on Google tends to show the highest ROAS because it catches people already looking for you. Meta prospecting tends to show lower ROAS because it reaches people earlier, and more of its effect lands on other channels. Set each channel's target from your margin, then use an incrementality test to check that the best-looking channels are not just collecting sales that would have happened anyway.
How to improve ROAS without fooling yourself
- Fix the value you report: ex VAT, net of refunds and from real sales. For leads, import closed sales from the CRM; our guide to offline conversion tracking shows how.
- Send gross profit as the conversion value, so bidding favours your profitable products and services.
- Split brand and non-brand search, so brand's high ROAS does not hide weak prospecting.
- Cut what sits below break-even at the margin: search terms, placements, audiences and products whose marginal ROAS is under your break-even figure.
- Improve the page, not just the ad. A higher conversion rate or order value lifts ROAS without extra spend.
- Move budget weekly on gross profit per pound between brands, locations and channels, rather than once a quarter.
One warning: ROAS rises whenever you cut spend, because the weakest sales go first. The goal is the most gross profit after media, not the highest ratio.
Where Orion fits
Orion's Growth service runs Google, Meta and ChatGPT ads, SEO and GEO on one live view, with every channel judged on gross profit, not clicks, and budget moved weekly; you approve the moves. If you suspect part of your spend sits below break-even, the diagnostic finds the channels that return less and puts a cost on each finding.
See it on a sample business
Orion joins every channel, brand and account into one live view, judged on profit. Open the platform on sample data, or book a 30-minute call about your own numbers.
Questions people ask
What is a good ROAS for Google Ads?
A good ROAS for Google Ads is any figure above your break-even ROAS, which is 1 divided by your gross margin. At a 40% margin that is 2.5, which Google shows as a 250% target ROAS. Use ex-VAT values from recorded sales, and judge brand and non-brand search separately, because brand search usually reports a high ROAS from people who were already looking for you.
What is a good ROAS for Facebook ads?
The same rule applies: above 1 divided by your gross margin, measured against sales you actually recorded. Meta can count sales from people who only saw an ad, so its reported ROAS often sits above what your CRM can match. Reconcile it with your sales records and, for larger budgets, run a lift or geo holdout test before deciding whether Meta is working.
What is marginal ROAS?
Marginal ROAS is the extra revenue from the last extra pound of spend, rather than the average across the whole budget. If raising spend from £15,000 to £20,000 adds £10,000 of revenue, the marginal ROAS is 2.0, even if the average still looks healthy. When marginal ROAS falls below your break-even ROAS, the extra spend is losing gross profit.
How do you improve ROAS?
Start with the value you report: ex VAT, net of refunds and based on recorded sales. Then send gross profit as the conversion value, split brand from non-brand search, cut search terms and placements below break-even, and improve landing pages and order value. Remember that cutting spend raises ROAS on its own, so aim for the most gross profit after media, not the highest ratio.
How do you calculate break-even ROAS?
Divide 1 by your gross margin, written as a decimal. Gross margin should be after every cost that rises with each sale, such as goods, delivery, payment fees and returns, and worked out ex VAT. A 40% margin gives a break-even ROAS of 2.5; a 25% margin gives 4.0. Below that figure, each sale from your ads loses money before overheads.
Do you want ROAS to be high or low?
High, for any given pound of spend, but not at any cost. ROAS is usually highest at low budgets, because the first sales are the easiest, so maximising ROAS can mean spending too little. The better aim is the most gross profit after ad spend, which often sits at a lower ROAS than the peak, as long as marginal ROAS stays above break-even.