# Understanding ROAS and How to Calculate It with a Free Calculator

Liam Hall • 27th Mar 2023

ROAS Calculator

As a business owner or marketer, one of the key goals of your advertising efforts is to maximise your return on investment (ROI). To achieve this, it’s important to understand a key metric known as return on ad spend (ROAS). In this blog, we’ll explore what ROAS is, why it’s important, and how you can calculate it using our free calculator.

## What is ROAS?

ROAS is a metric that measures the effectiveness of your advertising campaigns by calculating the revenue generated from your ads compared to the amount spent on those ads. In simple terms, ROAS is the ratio of revenue to ad spend. For example, if you spend £100 on advertising and generate £500 in revenue, your ROAS would be 5:1.

## Why is ROAS Important?

ROAS is an important metric because it provides a clear indication of the effectiveness of your advertising campaigns. By measuring the revenue generated from your ads compared to the amount spent, you can determine which campaigns are delivering the best return on investment and adjust your advertising strategy accordingly. By focusing on campaigns with a high ROAS, you can maximise your advertising efforts and improve your overall ROI.

## How to Calculate ROAS

Calculating ROAS is simple. To calculate your ROAS, you need to divide your revenue by your ad spend. The formula for calculating ROAS is:

ROAS = Revenue / Ad Spend

For example, if you spend £500 on advertising and generate £2,000 in revenue, your ROAS would be:

ROAS = £2,000 / £500 ROAS = 4:1

This means that for every pound you spend on advertising, you generate £4 in revenue.

## What is a Good ROAS?

Determining what is considered a good ROAS can be tricky as it depends on several factors such as the advertising channel, profit margin, and business goals. For example, a ROAS of 2:1 may be considered good for a social media advertising campaign, but for a Google search ad, a ROAS of 5:1 may be more desirable. The reason for this is that different advertising channels have varying costs and conversion rates, which can affect the ROAS. Additionally, it’s important to consider the profit margin of the product or service being sold, as a lower profit margin may require a higher ROAS to make a campaign profitable. Therefore, it’s essential for businesses to consider their unique circumstances when determining what a good ROAS is and to set realistic expectations for their campaigns.

## What Is the Difference Between ROAS and ROI?

ROAS and ROI are different metrics because they measure different aspects of financial performance. ROAS is focused solely on measuring the effectiveness of advertising campaigns, while ROI takes a more holistic approach by measuring the overall profitability of an investment. ROAS looks at the revenue generated by an advertising campaign relative to the amount of money spent on that campaign, which helps advertisers understand how efficiently their advertising spend is being used. ROI, on the other hand, considers all costs and revenue generated by an investment, including production costs, overhead, and other expenses, to determine the overall profitability of that investment. By using both ROAS and ROI, businesses can gain a comprehensive understanding of the effectiveness and profitability of their advertising and other investments, allowing them to make informed decisions about future investments.

## Using Our Free ROAS Calculator

Calculating ROAS manually can be time-consuming, especially if you have multiple advertising campaigns to measure.

To use our handy ROAS calculator, all you need to do is enter the revenue generated from your ads and the amount spent on those ads. The calculator will then automatically calculate your ROAS and display the results.