Understanding how well your advertising dollars are performing is critical for any campaign’s success. Hedgehog’s ROAS (Return on Ad Spend) Calculator makes it easy to measure the effectiveness of your ads by comparing revenue generated to the amount spent on advertising. Whether you’re running Google Ads, Meta campaigns, or any other paid ads, this calculator provides a quick and clear snapshot of how well your investments are paying off. Fine-tune your campaigns, allocate your budget wisely, and improve your overall marketing strategy with this essential tool.
What this calculator does
Calculate your Return on Ad Spend (ROAS) - the revenue generated for every dollar spent on advertising. Enter your ad spend and the revenue attributed to that spend, and the calculator outputs your ROAS ratio and a plain-English read on whether your campaigns are profitable based on your margin.
What ROAS actually means
A ROAS of 4 means you generated $4 in revenue for every $1 spent on ads. But ROAS alone doesn't tell you whether a campaign is profitable - that depends on your margin. A 4x ROAS with a 60% margin is highly profitable. A 4x ROAS with a 20% margin means you're barely breaking even after cost of goods. Always interpret ROAS in the context of your gross margin, not in isolation.
The formula: ROAS = Revenue from ads ÷ Cost of ads. A ROAS of 1 means you broke even. Below 1 means you lost money. The target ROAS for a profitable campaign varies by industry and margin - for ecommerce with 50% margins, a 3x ROAS is generally the break-even point. For high-margin services, 2x ROAS may be very profitable.
ROAS vs. ROI: the difference that matters
ROAS measures revenue relative to ad spend. ROI measures profit relative to total investment (including cost of goods, labour, and other costs). ROAS is a media efficiency metric - useful for comparing campaigns. ROI is a business profitability metric - useful for deciding whether advertising is worth doing at all.
For ecommerce businesses, a common mistake is optimising Google Ads or Meta campaigns toward a ROAS target without accounting for cost of goods. A campaign hitting 5x ROAS on a product with 80% cost of goods is losing money. Set your ROAS target based on your margin, not an industry benchmark.
How to set a target ROAS
Work backwards from your margin: if your gross margin is 40%, you need more than 2.5x ROAS to be profitable on ad spend alone (1 ÷ 0.4 = 2.5). Add a buffer for overheads and you want at least 3–4x ROAS to be confident you're generating real profit. For Google Ads, set this as your Target ROAS bid strategy only once you have 50+ conversions per month - below that, Smart Bidding doesn't have enough data to optimise reliably.
Related resources