ROAS Formula: How to Calculate ROAS and Your Break-even ROAS
Quick answer: ROAS = revenue from ads ÷ ad spend. If you spend 1,000 SAR and sell 4,000 SAR, ROAS is 4.0 (or 400%). Your break-even ROAS = 1 ÷ profit margin before ads. With a 25% margin you need a ROAS of 4.0 just to not lose money.
Calculate your break-even ROAS →
Why a 'good' ROAS can still lose money
ROAS counts sales, not profit. A ROAS of 3 looks good, but if your margin is 25%, every 3,000 SAR of sales leaves only 750 SAR before ads. If those sales cost 1,000 SAR in ads, you lost 250 SAR.
Break-even ROAS by profit margin
| Profit margin before ads | Break-even ROAS |
|---|---|
| 20% | 5.0 |
| 25% | 4.0 |
| 30% | 3.33 |
| 40% | 2.5 |
| 50% | 2.0 |
| 60% | 1.67 |
Profit margin before ads = (price − product cost − shipping − payment and platform fees) ÷ price. Use prices before VAT.
Worked example
| Item | Amount (SAR) |
|---|---|
| Selling price (before VAT) | 200 |
| Product cost | 110 |
| Shipping and fees | 40 |
| Profit per order before ads | 50 |
| Margin before ads | 50 ÷ 200 = 25% |
| Break-even ROAS | 1 ÷ 0.25 = 4.0 |
| Most you can pay for one order (break-even CPA) | 50 |
If your campaign brings orders at 35 SAR each, you earn 15 SAR per order. At 60 SAR each, you lose 10 SAR on every order.
How to improve ROAS
- Raise the margin: better supplier price, higher price, cheaper shipping.
- Increase order value with bundles or free shipping above a minimum.
- Cut ad sets with a ROAS below break-even after enough data.
- Count repeat purchases too: see CAC and LTV for the full customer value.
Frequently asked questions
What is the ROAS formula?
ROAS = revenue from ads ÷ ad spend. 4,000 SAR sales from 1,000 SAR ads = ROAS 4.0.
How do I calculate break-even ROAS?
Break-even ROAS = 1 ÷ profit margin before ad cost. A 25% margin needs ROAS 4.0.
What is a good ROAS?
Any ROAS above your break-even ROAS is profitable. A ROAS of 3 is good for a 50% margin but loses money for a 25% margin.
What is the difference between ROAS and ROI?
ROAS compares sales to ad spend. ROI compares profit to total cost, so it shows if you really made money.
Should VAT be included in ROAS?
Use revenue before VAT for profit math, because VAT is paid to ZATCA and is not your income.
Official sources
This guide explains the general rules. It is not legal advice.