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ROAS

ROAS

(Return on Ad Spend)

ROAS reveals how much revenue your ads generate for every dollar spent — and whether that spend is truly working for you. Learn how to calculate it and apply it to maximize your marketing returns.

Understanding ROAS

Return on Ad Spend (ROAS) is one of the most important metrics for evaluating the effectiveness of any advertising investment. By comparing the revenue generated to the amount spent on ads, ROAS provides a clear view of how efficiently your budget is being used. Whether you’re running digital campaigns, traditional media buys, or a mix of channels, tracking ROAS helps you identify which efforts are driving results and which need refinement. Mastering this metric enables better budget allocation, sharper strategy, and ultimately, stronger returns from your marketing spend.

How to Calculate ROAS

ROAS = Revenue from Ads / Ad Spend

Give it a go in our ROAS calculator!

ROAS Calculator

Estimated ROAS:
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Calculation Example

Suppose your target ROAS needs to be 4.0 or higher to meet your profitability goals. If your total ad spend is $10,000, calculate the minimum revenue you need to generate:

Revenue = ROAS × Ad Spend

Revenue = 4 × $10,000

Revenue = $40,000

Aim to keep your revenue at or above $40,000 for every $10,000 in ad spend to maintain your desired ROAS.

Note: ROAS focuses purely on the revenue generated from your advertising spend. It does not account for other business costs like product manufacturing, fulfillment, or returns. For a true picture of profitability, consider pairing ROAS analysis with metrics such as gross margin or customer lifetime value.

What Tools Measure LTV:CAC Ratio?

You’d think calculating your LTV:CAC ratio would be straightforward — but surprisingly, most tools don’t make it easy.

This metric requires connecting costs with customer value over time — something very few platforms are built to do natively. Let’s break down where you can get this data, where the gaps are, and how Incendium fills them.

GA4: Can You Measure LTV:CAC?

Not easily. GA4 doesn’t show customer acquisition cost at all, and its Lifetime Value report is:

● Hidden under the “Explore” tab.

● Limited to revenue per user over a fixed period (e.g. 90 days).

● Lacking cohort-level breakdowns.

● Not connected to ad spend or margin data.

So while you can approximate parts of LTV in GA4, you’ll need spreadsheets to:

● Pull in ad costs from Google Ads, Meta, etc.

● Match spend to customer cohorts.

● Adjust for churn, returns, or contribution margin.

It’s doable — but; manual, error-prone, and not scalable.

❌ No CAC
❌ No contribution margin
❌ No retention-based LTV
❌ No channel or campaign granularity

Spreadsheet-Based Models

Many marketers and finance teams rely on custom spreadsheet models. These usually involve:

● Exporting revenue data from Shopify or GA4.

● Pulling in ad costs from platforms like Meta or Google.

● Matching acquisition dates to cohorts.

● Calculating LTV over time.

● Segmenting CAC by channel (if possible).

This can work for small teams — but:

● It's time-consuming.

● Easy to break as your business grows.

● Difficult to segment and troubleshoot.

● Hard to update frequently enough to make real-time decisions.

✅ Flexible
❌ Time-consuming
❌ Not real-time
❌ High error risk

Incendium: LTV:CAC Done Right

Incendium was built for this. It automatically connects:

● Ad platform spend (Google, Meta, TikTok, etc).

● Revenue and margins (from Shopify, Stripe, etc).

● Customer retention curves.

● Channel and campaign attribution.

● Cohort-based performance over time.

Then it presents your true LTV:CAC ratios — by channel, campaign, customer segment, and acquisition cohort — without the need for spreadsheets.

Whether you want to:

● See if paid search is actually profitable.

● Compare returning vs new customers.

● Measure payback periods.

● Or optimize toward high-LTV audiences.

…you’ll have it, instantly.

✅ Automated
✅ Channel + cohort breakdowns
✅ Margin-based LTV
✅ Attribution-integrated
✅ Real-time, self-updating

What Tools Measure LTV:CAC Ratio?

You’d think calculating your LTV:CAC ratio would be straightforward — but surprisingly, most tools don’t make it easy.

This metric requires connecting costs with customer value over time — something very few platforms are built to do natively. Let’s break down where you can get this data, where the gaps are, and how Incendium fills them.

GA4: Can You Measure LTV:CAC?

Not easily. GA4 doesn’t show customer acquisition cost at all, and its Lifetime Value report is:

● Hidden under the “Explore” tab.

● Limited to revenue per user over a fixed period (e.g. 90 days).

● Lacking cohort-level breakdowns.

● Not connected to ad spend or margin data.

So while you can approximate parts of LTV in GA4, you’ll need spreadsheets to:

● Pull in ad costs from Google Ads, Meta, etc.

● Match spend to customer cohorts.

● Adjust for churn, returns, or contribution margin.

It’s doable — but; manual, error-prone, and not scalable.

❌ No CAC
❌ No contribution margin
❌ No retention-based LTV
❌ No channel or campaign granularity

Spreadsheet-Based Models

Many marketers and finance teams rely on custom spreadsheet models. These usually involve:

● Exporting revenue data from Shopify or GA4.

● Pulling in ad costs from platforms like Meta or Google.

● Matching acquisition dates to cohorts.

● Calculating LTV over time.

● Segmenting CAC by channel (if possible).

This can work for small teams — but:

● It's time-consuming.

● Easy to break as your business grows.

● Difficult to segment and troubleshoot.

● Hard to update frequently enough to make real-time decisions.

✅ Flexible
❌ Time-consuming
❌ Not real-time
❌ High error risk

Incendium: LTV:CAC Done Right

Incendium was built for this. It automatically connects:

● Ad platform spend (Google, Meta, TikTok, etc).

● Revenue and margins (from Shopify, Stripe, etc).

● Customer retention curves.

● Channel and campaign attribution.

● Cohort-based performance over time.

Then it presents your true LTV:CAC ratios — by channel, campaign, customer segment, and acquisition cohort — without the need for spreadsheets.

Whether you want to:

● See if paid search is actually profitable.

● Compare returning vs new customers.

● Measure payback periods.

● Or optimize toward high-LTV audiences.

…you’ll have it, instantly.

✅ Automated
✅ Channel + cohort breakdowns
✅ Margin-based LTV
✅ Attribution-integrated
✅ Real-time, self-updating

What Tools Measure LTV:CAC Ratio?

You’d think calculating your LTV:CAC ratio would be straightforward — but surprisingly, most tools don’t make it easy.

This metric requires connecting costs with customer value over time — something very few platforms are built to do natively. Let’s break down where you can get this data, where the gaps are, and how Incendium fills them.

GA4: Can You Measure LTV:CAC?

Not easily. GA4 doesn’t show customer acquisition cost at all, and its Lifetime Value report is:

● Hidden under the “Explore” tab.

● Limited to revenue per user over a fixed period (e.g. 90 days).

● Lacking cohort-level breakdowns.

● Not connected to ad spend or margin data.

So while you can approximate parts of LTV in GA4, you’ll need spreadsheets to:

● Pull in ad costs from Google Ads, Meta, etc.

● Match spend to customer cohorts.

● Adjust for churn, returns, or contribution margin.

It’s doable — but; manual, error-prone, and not scalable.

❌ No CAC
❌ No contribution margin
❌ No retention-based LTV
❌ No channel or campaign granularity

Spreadsheet-Based Models

Many marketers and finance teams rely on custom spreadsheet models. These usually involve:

● Exporting revenue data from Shopify or GA4.

● Pulling in ad costs from platforms like Meta or Google.

● Matching acquisition dates to cohorts.

● Calculating LTV over time.

● Segmenting CAC by channel (if possible).

This can work for small teams — but:

● It's time-consuming.

● Easy to break as your business grows.

● Difficult to segment and troubleshoot.

● Hard to update frequently enough to make real-time decisions.

✅ Flexible
❌ Time-consuming
❌ Not real-time
❌ High error risk

Incendium: LTV:CAC Done Right

Incendium was built for this. It automatically connects:

● Ad platform spend (Google, Meta, TikTok, etc).

● Revenue and margins (from Shopify, Stripe, etc).

● Customer retention curves.

● Channel and campaign attribution.

● Cohort-based performance over time.

Then it presents your true LTV:CAC ratios — by channel, campaign, customer segment, and acquisition cohort — without the need for spreadsheets.

Whether you want to:

● See if paid search is actually profitable.

● Compare returning vs new customers.

● Measure payback periods.

● Or optimize toward high-LTV audiences.

…you’ll have it, instantly.

✅ Automated
✅ Channel + cohort breakdowns
✅ Margin-based LTV
✅ Attribution-integrated
✅ Real-time, self-updating

What’s Considered a Healthy ROAS?

A “healthy” ROAS depends heavily on your industry, business model, and profit margins. While a 3:1 ratio (earning $3 in revenue for every $1 spent on ads) is often cited as a general benchmark, the right target varies:

● High-margin products or services can remain profitable with a lower ROAS (e.g., 2:1) because each sale yields more profit.

● Low-margin businesses may need a higher ROAS (4:1, 5:1 or more) to cover costs and stay viable.

● Early-stage growth campaigns may accept a lower ROAS temporarily if customer lifetime value (LTV) outweighs short-term returns.
‍

Gross Profit Margin
Typical Healthy ROAS
Notes
Over 70%
2:1 – 3:1
High margins can sustain lower ROAS targets.
50% – 70%
3:1 – 4:1
Balanced profitability; industry average range.
30% – 50%
4:1 – 5:1
Lower margins require stronger returns to cover costs.
Under 30%
5:1+
Very low margins need high efficiency to stay profitable.

Tip: Always calculate ROAS targets using your own cost structure rather than relying solely on industry norms. This ensures your ad spend is truly aligned with profitability.

ROAS FAQ

Should ROAS targets be different for prospecting and retargeting campaigns?

How does ROAS change over a product’s lifecycle?

Can seasonal trends distort ROAS?

How does attribution modelling affect ROAS?

Is there a risk in chasing the highest possible ROAS?

How should ROAS be tracked for subscription businesses?

What role does creative testing play in improving ROAS?

Should I measure ROAS at the channel, campaign, or ad level?

ROAS Related Reading

3 Common ROAS Pitfalls and How to Avoid Them
ROAS
3 Common ROAS Pitfalls and How to Avoid Them

ROAS is useful, but ignoring costs, lifetime value, and margin differences can lead to misleading results.