ROAS, or return on ad spend, measures revenue generated per dollar spent on advertising. The frustrating but honest answer to "what's a good ROAS" is: it depends entirely on your margins, not a universal benchmark you can borrow from someone else's business.
Why a Generic Benchmark Is Misleading
A 4x ROAS sounds impressive, but if your product has thin margins, that 4x might still mean you're losing money once you account for cost of goods, shipping, and overhead. Conversely, a 2x ROAS on a high-margin service can be highly profitable, even though it looks worse on paper.
How to Calculate Your Actual Break-Even ROAS
Divide 1 by your profit margin (expressed as a decimal) to get your break-even ROAS — the point at which advertising is neither making nor losing you money. A 25% margin business needs roughly a 4x ROAS just to break even; anything above that is genuinely profitable.
Factors That Shift Your Real Target
- Customer lifetime value — if customers buy repeatedly, a lower initial ROAS can still be profitable long-term
- Whether you're measuring first-purchase ROAS or factoring in repeat purchases
- Industry-typical margins, which vary enormously between, say, ecommerce and professional services
The Bottom Line
Before chasing an industry-average ROAS number, calculate your own break-even point based on your actual margins. A "good" ROAS is simply one that's meaningfully above that number, not a fixed figure borrowed from someone else's business. If you'd like help running this calculation properly for your own numbers, Project Five Digital offers a free strategy session to work through it together.