ROAS and its relatives, in plain English
ROAS (return on ad spend) measures the revenue generated by every dollar you put into advertising. In Google Ads, it shows up as the Conv. value/cost column. Five related metrics complete the picture:
- ROAS = ad revenue ÷ ad spend. $12,000 in sales from $3,000 in spend is a ROAS of 4, or 400%.
- Break-even ROAS (minimum ROAS) = 1 ÷ gross margin. Below it, every sale costs more in ads than it brings in margin.
- CPA (cost per acquisition) = ad spend ÷ number of sales. Your maximum CPA is sale value × gross margin. It is the same logic as Google's Target CPA bidding, where you set the average cost per conversion you want.
- Target ROAS = 1 ÷ (gross margin − target net margin): the number to enter in a Target ROAS bid strategy.
- POAS (profit on ad spend) = gross profit generated ÷ ad spend. It looks at profit, not revenue: above 1, your ads make money. Ad ROI follows from it: (gross profit − ad spend) ÷ ad spend.
How to use the calculator
- Pull ad spend and conversion value for the same period (the Cost and Conv. value columns in Google Ads), excluding sales tax.
- Enter your average gross margin: (selling price − cost of the product or service) ÷ selling price.
- Read the verdict on the ROAS tab: profitable, break-even or losing money.
- Open the Break-even tab for your threshold and maximum CPA, then the Target ROAS tab for the goal to enter in Google Ads.
- If you know the exact cost of your sales, the ROI & POAS tab shows your real profit.
Worked examples
An online store spends $3,000 in a month and generates $12,000 in sales: 80 orders at a $150 average order value, with a 40% gross margin. These are the calculator's default values.
- ROAS: 12,000 ÷ 3,000 = 4, or 400%.
- Break-even ROAS: 1 ÷ 0.40 = 2.5. At a ROAS of 4, the campaign is profitable.
- Margin left after ads: $12,000 × 40% − $3,000 = $1,800.
- Actual CPA: $3,000 ÷ 80 = $37.50, below the maximum CPA of $150 × 40% = $60.
- To keep a 10% net margin, target ROAS is 1 ÷ (0.40 − 0.10) = 3.33, so 333% in Google Ads.
- POAS: ($12,000 − $7,200 cost of goods) ÷ $3,000 = 1.6, which is a 60% ROI.
The same logic works for a service business, as long as each lead carries a value. On a carpentry account we manage, €27,500 in ad spend generated €152,000 in conversion value: a ROAS of 5.5. Even at a 30% gross margin (break-even 3.33), that ROAS would stay profitable.
What is a good ROAS?
There is no universal good ROAS: it depends on your margin. A ROAS of 4 makes a 50% margin brand rich and barely pays back a store running on 25%.
| Gross margin | Break-even ROAS | In Google Ads |
|---|---|---|
| 20% | 5.00 | 500% |
| 25% | 4.00 | 400% |
| 30% | 3.33 | 333% |
| 40% | 2.50 | 250% |
| 50% | 2.00 | 200% |
| 60% | 1.67 | 167% |
For market context, Optmyzr's Q2 2026 benchmark report, built on more than 20,000 managed Google Ads accounts, puts the median ROAS at 557% for ecommerce advertisers and 511% for small businesses. The same report warns that a median does not tell you where your business should sit, and that Local Services campaigns show artificially low ROAS when their conversions pass no dollar value back to Google. The rule that holds: a good ROAS stays above your break-even point, with enough volume to grow total profit.
How to set target ROAS in Google Ads
Target ROAS is entered as a percentage. Google's own help center gives this example: $5 in sales ÷ $1 in ad spend × 100% = 500% target ROAS. Since June 2026, the strategy "Maximize conversion value with a Target ROAS" is labeled simply "Target ROAS", with no change in how it bids.
- Requirements: conversion values set up and, for Search and Shopping campaigns, at least 15 conversions in the past 30 days.
- Starting point: Google recommends setting the target from your business goals, using your historical ROAS as a reference (the Conv. value/cost column multiplied by 100).
- Adjustments: a target that is too high may limit your traffic. To gain volume, Google suggests lowering the target gradually and allowing one to two conversion cycles after each change.
Our method: compare the target ROAS calculated above with your historical ROAS, start at the lower of the two, then raise it in steps as long as volume holds.
Common mistakes
- Confusing ROAS with profit: a ROAS of 3 loses money at a 25% margin.
- Counting revenue with sales tax included, which inflates ROAS.
- Ignoring returns, cancellations and unsigned quotes in the value you report to Google.
- Counting the same sale twice through several conversion actions.
- Copying a competitor's ROAS or a benchmark without checking your own margin.
- Judging after one week: conversion value arrives with a delay, especially on considered purchases.
To size the spend itself, use our Google Ads budget calculator or read how much Google Ads costs a small business. If you would rather hand it off, here is how we manage Google Ads.
