1. What is ROAS?

ROAS (Return on Ad Spend) is a marketing metric that measures the effectiveness of advertising campaigns. It shows how much gross profit is earned for every dollar spent on advertising.

2. How Does the Calculator Work?

The calculator uses the ROAS equation:

Where:

• \( Gross\ Profit \) — Total revenue minus cost of goods sold (USD)
• \( Ad\ Cost \) — Total advertising spend (USD)

Explanation: A ROAS of 5 means you earn $5 in gross profit for every $1 spent on advertising.

3. Importance of ROAS Calculation

Details: ROAS helps businesses evaluate advertising efficiency, optimize marketing budgets, and determine which campaigns are most profitable.

4. Using the Calculator

Tips: Enter gross profit and ad cost in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROAS for dropshipping?
A: A ROAS of 4+ is generally good, but depends on profit margins. Higher-margin products can tolerate lower ROAS.

Q2: How is ROAS different from ROI?
A: ROAS measures advertising efficiency specifically, while ROI measures overall business profitability.

Q3: Should I include all costs in ROAS calculation?
A: For pure ROAS, use only advertising costs. For full profitability analysis, consider all business costs.

Q4: How often should I calculate ROAS?
A: Monitor ROAS regularly - weekly for active campaigns, monthly for overall performance.

Q5: Can ROAS be negative?
A: No, but values below 1 indicate you're spending more on ads than you're earning in gross profit.