There are countless metrics available to measure the success of a Google Ads campaign, but if there’s one you should prioritize, it’s ROAS — Return on Ad Spend. In this guide, we’ll break down everything you need to know about ROAS, from how to calculate it to why it’s crucial for your business. Plus, we’ve included a free ROAS calculator to make your life easier. Let’s get started!
Table of Contents
- Why You Need to Calculate Your ROAS
- How to Calculate Your ROAS
- ROAS Calculator
- Understanding Your ROAS Goal
- How to Achieve Your ROAS Goal
- Why ROAS Matters for Your Business
Why You Need to Calculate Your ROAS
ROAS, or Return on Ad Spend, is more than just another marketing acronym. It’s a critical metric that helps you understand the effectiveness of your advertising efforts. Simply put, ROAS tells you how much revenue you’re generating for every dollar spent on advertising.
Businesses in Western Canada, such as those in Edmonton, Calgary, and Victoria, need to understand ROAS. This knowledge will help them grow their campaigns.
For example, if you spend $500 on ads and generate $1,000 in revenue, your ROAS is 2X, or 200%.
But what does that really mean for your business? Is doubling your ad spend enough to cover all your costs and drive profit? That’s where understanding your profit margins comes in.
How to Calculate Your ROAS
Let’s break it down into a few simple steps:
- Determine Your Ad Spend: Start by looking at how much you’ve spent on Google Ads during a specific period.
- Calculate Your Revenue: Next, total up the revenue generated from those ads. This could be from direct sales or attributed sales.
- Apply the ROAS Formula: Divide your revenue by your ad spend. That’s your ROAS!
The ROAS Formula
Calculating ROAS is straightforward: Revenue ÷ Ad Spend = ROAS
Example Calculation
Imagine you spent $1,000 on Google Ads last month and earned $3,000 in revenue. Using the ROAS formula:
$3,000 (Revenue) ÷ $1,000 (Ad Spend) = 3X or 300%
This means for every dollar you spent, you earned three dollars in return. A solid start, but is it enough to meet your profit goals?
Understanding Your ROAS Goal
Your ideal ROAS isn’t just about generating more revenue than you spend on ads. It’s about ensuring that revenue covers all your business costs and then some. This is why understanding your profit margins is essential.
Setting Your ROAS Goal
To set a realistic ROAS goal, you need to know your profit margin — the percentage of sales that turns into profit after all costs are considered. The larger your profit margin, the lower your ROAS goal can be.
Example
If your profit margin is 25%, you’ll need to achieve a 4X ROAS to hit 100% profit (25% x 4 = 100%). In other words, a 400% ROAS is your minimum goal to ensure your business is profitable.
ROAS Calculator
Ready to calculate your ROAS? Use our free ROAS calculator below. Simply input your ad spend and revenue, and it will calculate your ROAS for you.
Why ROAS Matters for Your Business
ROAS isn’t just about tracking how much money your ads bring in; it’s a vital measure of your overall business health. While metrics like click-through rate, impressions, and cost per conversion are important, they don’t tell the whole story. ROAS, however, gives you a clear view of your return on investment, helping you make data-driven decisions.
ROAS and Business Strategy
A high ROAS might indicate a successful campaign, but it doesn’t necessarily mean your business is thriving. If your profit margins are thin, you’ll need a much higher ROAS to sustain growth. This is why many businesses in Edmonton, Calgary, and Victoria turn to a PPC agency like Local Propeller for help. We specialize in optimizing ROAS to ensure your ad spend translates into meaningful profit.
How to Achieve Your ROAS Goal
Achieving your ROAS goal requires more than just understanding the numbers. It’s about optimizing your campaigns, refining your targeting, and continually testing new strategies. This is where a professional PPC agency can make a significant difference.
Why Work with a PPC Agency?
A dedicated PPC agency brings the expertise needed to analyze, measure, and strategize based on your ROAS data. If you’re not hitting your ROAS goals, or if you’re unsure what those goals should be, it might be time to consider professional help.
Get Started with Local Propeller
At Local Propeller, we take ROAS seriously. Our team is here to help businesses in Western Canada maximize their ad spend and drive real, sustainable growth. Want to know more about how we can help you achieve your ROAS goals? Contact us today!
