What Is A Good ROAS? The Number That Tells You If Google Ads Is Paying
Stop comparing yourself to other people’s numbers. Work out your own.
What is a good ROAS? Ask five people and you will get five answers, and none of them will know your margins. ROAS is the money you get back for every £1 you spend on ads. Whether that number is good depends on what you keep from each sale, not on a benchmark someone else posted online.
Quick Version
A good ROAS is any number comfortably above your break-even ROAS. Break-even is 1 divided by your profit margin on the sale. Everything else is detail.
The short version:
- ROAS is the revenue your ads bring in divided by what you spent on them. £5 back for £1 spent is a ROAS of 5, which Google Ads shows as 500%.
- Break-even ROAS is 1 divided by your margin. Keep 25% of each sale and you need a ROAS of 4 just to cover the cost of the ads.
- Margin means what is left after the cost of doing the work, not the price you charged.
- Above break-even you make money. Below it you lose money, however healthy the number looks on screen.
- Check what Google is counting as a conversion value before you trust any ROAS figure.
Work out your break-even number first. Then you know what good looks like for your business.
Not Sure where to start?
If you cannot say what a sale is worth to you after costs, start there. We can look at your account with you and tell you whether the number you are seeing is real.
The Full Guide: Working Out A Good ROAS From Your Own Margins
When someone asks what is a good ROAS, they usually want one number to aim for. There is not one, so here is how to find yours in five steps.
1. Know What ROAS Actually Measures
ROAS is conversion value divided by ad spend. Google shows it as a percentage, so £5 of sales for £1 of spend is a ROAS of 500%. Same thing as 5 to 1, just written differently.
It measures revenue, not profit. Two businesses can both see a ROAS of 4 on screen, and one makes money while the other loses it.
2. Work Out Your Break-Even ROAS
Break-even ROAS is 1 divided by your profit margin on the sale, before ad costs. Keep 40p of every £1 after the cost of doing the job and your break-even is 2.5. Below that you lose money. Above it you make some.
A few examples:
- 50% margin: break-even ROAS of 2
- 33% margin: break-even ROAS of 3
- 25% margin: break-even ROAS of 4
- 10% margin: break-even ROAS of 10
Use the margin on the whole sale, including labour, materials, delivery and card fees. If you are not sure of the real figure, ask your accountant rather than guessing.
3. Decide What Good Means Above Break-Even
Break-even means the ads pay for themselves and nothing more. Good means a cushion above that, enough to cover your time and overheads and leave something to grow with. There is no universal number for that, so pick a target comfortably above break-even and test whether you can hold it as spend goes up.
If you sell by enquiry rather than online, give each lead a value. If one enquiry in four becomes a customer worth £800, each enquiry is worth about £200. That £200 is the conversion value your ROAS should be built on.
4. Check What Google Is Counting As Value
ROAS is only as honest as the conversion value feeding it. If every form fill is set to £1, or every action is worth the same, the ROAS on screen means very little.
Check what each conversion action is worth in the account. Look for double counting too, such as a thank-you page firing twice, or a call and a form from the same person both being counted as separate sales.
5. Read ROAS Alongside Volume, Not On Its Own
A very high ROAS can mean you are only catching people who were already looking for you. Brand searches do this. A campaign with a ROAS of 10 on your own name tells you very little.
Split brand from non-brand before you judge anything. Then ask whether you could spend more at a lower ROAS that still sits above break-even. Chasing the highest possible ROAS often means turning down profitable sales.
Common Mistakes
If you are still asking what is a good ROAS after a month of tinkering, one of these is usually the reason.
- Copying a benchmark from a blog post or another business with different margins.
- Treating revenue as profit.
- Counting every enquiry as a sale at full value.
- Judging ROAS on brand searches that were always going to convert.
- Reading a week of data when your sales cycle is longer than that.
- Pushing for the highest ROAS and turning down sales that would have been profitable.
DIY lane vs done for you lane
DIY lane:
Work out your margin, set your break-even ROAS, check your conversion values, split brand from non-brand, and review monthly. Doable with an afternoon and an honest look at your numbers.
Done for you lane:
We set up conversion values properly, separate brand from non-brand, and report on profit as well as ROAS, so you know whether the ads are paying.
Related Guides on the wall
If you are working out what is a good ROAS, these guides will help you fix the surrounding setup too.
What Is A Good ROAS FAQs
One that sits comfortably above your break-even ROAS, which is 1 divided by your profit margin. If you keep 25% of each sale, break-even is 4, so a ROAS of 4 only covers the ads.
ROAS is revenue from ads divided by ad spend. ROI looks at profit after all your costs. You can have a healthy-looking ROAS and still lose money once the cost of delivering the work is counted.
Divide the revenue your ads brought in by what you spent. £2,000 of sales from £500 of spend is a ROAS of 4, which Google Ads shows as 400%.
It depends on your margin. At a 50% margin, a ROAS of 4 leaves you in profit after the ads. At a 25% margin it only breaks even.
Usually the conversion values are wrong, the margin is thinner than you think, or brand searches are flattering the number. Check each of those before you spend more.
A good ROAS is the one that leaves you in profit. Everything else is a number on a screen.
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