There are dozens of ways to measure the performance of a Google Ads campaign.

Impressions.

Click-through rate.

Conversions.

But at Solutions 8, we argue that ROAS should be one of your highest priorities when it comes to tracking campaign performance.

### Here’s Why

ROAS is so much more than just another acronym in our (acronym-addicted) industry. Here’s the skinny:

**ROAS = Return on ad spend.**

In other words, for every dollar you spend on advertising, how much do you get back?

### How to Calculate Your Current Return on Ad Spend

It’s actually pretty simple to determine your current ROAS percentage. First, you’ll need to calculate:

- How much money you spent on Google Ads (
**ad spend**) - How much money you made on the products sold by those ads (
**revenue**)

…then just plug those numbers into this formula:

**Revenue ÷ Advertising Costs = ROAS**

### Give Me an Example

Okay, let’s say you spent $500 in ads and made $1000 in revenue so far this month. Your formula would look like this:

**1000 (Revenue) ÷ 500 (Ad Spend) = 2**

This means you’re looking at 200% (2X) ROAS.

And that’s good, right?

You doubled your dollar!

…Well, for many businesses, 200% might not even be breaking even.

Sure, you doubled your dollar in **ad spend**; but ideally, the revenue those ads generate should do more than just pay for themselves — we want our return to cover the majority of your fixed costs, too.

### Okay, So What *Should* Your ROAS % Be?

Here’s an answer you’ll love:

It depends.

Generally, a 300% return ($3 in revenue for every $1 spent on advertising) is considered a “golden rule” for ROAS.

But the reality is **every business is different** — with unique costs and overhead, which is why:

### It All Comes Down to Profit Margins

(.i.e. the percentage of sales that turn into a profit.)

Between rent, production costs, payroll, shipping, insurance — the list of fixed costs are nearly endless for a business to stay up and running.

So, to determine what your ROAS goal should be, you first need to calculate your profit margin.

See, the **larger** your profit margin, the lower your ROAS goal needs to be.

A **smaller** profit margin? A higher your ROAS goal.

#### Another Example, Please!

Let’s say you have a 25% profit margin.

So, after paying for rent, employees, production, an Ads agency, and every other fixed cost to keep business afloat — you still manage to keep 25% of the money you bring in.

### Now, Use Your Profit Margin to Calculate Your ROAS Goal

Ready to dust off those algebra skills? To figure out your ROAS goal, we need to solve for Y:

**100% = (Current Profit Margin%) x (Y)**

Let’s break that down.

In order to reach 100% profit (the ultimate business goal), you need to determine how many times your current profit margin must be multiplied.

So, here’s that equation using our example of a 25% profit margin:

**100% = (25%) x (4)**

In this example, you need to multiply your profit margin four times over (4x) to reach 100% profit. Putting your ROAS goal at:

**400%**

In other words, whatever the multiple is (Y) that you need to reach 100% profit (using your current profit margin) **is your minimum ROAS goal**; just turn that number into a triple-digit (e.g. 4X = 400 and 1.5X = 150) and a percentage sign at the end.

And, voila! You’ve got your ROAS goal.

### A Quick Overview

Before we go any further, let’s do a quick review:

- To
**calculate your current ROAS%**, simply divide your revenue by the amount of money you spent on ads. - To
**calculate your ROAS% goal**, determine what your current profit margin is and how many times that number must be multiplied to hit 100% profit

### Where Do You Measure ROAS, Exactly? A Single Campaign? Ad Groups?

Believe it or not, ROAS isn’t a pre-existing column inside of Google Ads. You can, however, customize your dashboard to include ROAS%.

Once that ROAS column is in place, you can measure your current ROAS at any level:

- Your Ads account
- A campaign
- Ad groups
- Keywords

…You name it, you can measure it.

As long as you know how much you’re spending and earning in each category — you can determine your ROAS%.

### Why Your Ads Agency Should Use ROAS to Measure Success

ROAS is a glimpse at the big picture.

See, your ROAS% is about more than how much money you get back from your ad spend; ROAS is a pulse-check on your overall business.

While other metrics like click-through rate, impressions, and cost per conversion are valuable, they don’t show us how much revenue these actions bring in.

Sure, they tell us about leads — but not the **quality** of those leads.

Think of it this way: ROAS shows us that, while some campaigns might **rank poorly** for traffic and conversion metrics, they might actually be the **most profitable**.

🤯 🤯 🤯

In this example, although the campaign is limited by budget, it is absolutely crushing the ROAS game.

Conversely, a campaign with incredible traffic may have crappy sales and cost more than the actual sale is worth.

To put it (really) simply:

If your online ads aren’t making you money, you need to change something.

But, if you’re not tracking ROAS, you won’t know what to change.

### How to Obtain Your ROAS Goal

How you use ROAS data can have a massive impact on your business as a whole.

And while it’s easy to calculate your ROAS and come up with a strong ROAS goal — it’s not quite as easy to obtain that goal on your own.

This is why most businesses hire a PPC agency: to analyze, measure, and strategize using the data from your Ads campaigns.

But if your Ads agency doesn’t make ROAS a top priority in measuring success, it’s time to find someone else.

### Questions?

At Solutions 8, we take ROAS seriously. If you have questions about your current ROAS, what it should be, and how to get there — reach out.

We’re here to help.