What Is Return on Ad Spend?
Return on ad spend, or ROAS, measures how much revenue your advertising generates for each dollar spent. The formula is revenue from ads divided by ad spend. If $1,000 in ads produces $5,000 in sales, your ROAS is 5, often written as 5:1 or 500 percent.
ROAS focuses only on advertising costs and the revenue those ads produce. It is narrower than return on investment, which accounts for all costs, including products, labor, and overhead.
Why Return on Ad Spend Matters for Northern Indiana & Michiana Businesses
ROAS shows which ads truly pay off. A Goshen furniture store may find that Google Shopping ads return 8 dollars for every dollar while a broad display campaign returns 1.5, which makes the next budget decision clear.
For service businesses across Northern Indiana, ROAS connects ad spending to booked jobs and contracts, as long as leads are tracked through to revenue in a CRM or sales records.
ROAS also keeps budgets honest during busy seasons. When demand rises and ad costs climb, comparing ROAS week over week shows whether higher spending is still producing profitable sales or simply buying more expensive clicks.
How Return on Ad Spend Works
- Track revenueConnect ad conversions to actual sales values.
- Track spendRecord total ad spend for the same period and campaign.
- CalculateRevenue divided by ad spend.
- Compare campaignsFind which campaigns and channels earn the highest return.
- Set a targetUse your margins to determine the minimum profitable ROAS.
A Local Example
A Valparaiso landscaping company spends $3,000 on Google Ads over a spring season. By tracking which leads become signed projects in its CRM, it attributes $24,000 in revenue to the ads, for a ROAS of 8. Patio and hardscape campaigns show the highest return, while general lawn care campaigns return less.
The company shifts budget toward hardscape campaigns the following spring and keeps a smaller lawn care campaign focused on its best towns.
Getting Started With Return on Ad Spend
Make sure you can connect ad leads to revenue. For online sales, ecommerce tracking handles this. For service businesses, record the lead source in your CRM and note the value of each closed job.
Calculate ROAS for each campaign over a meaningful period, such as a quarter. Then figure out your break-even ROAS using your profit margin: if your margin is 40 percent, you need a ROAS of at least 2.5 to cover ad costs. Shift budget toward campaigns comfortably above that line.
Quick Wins to Improve Your Return on Ad Spend
- Connect ad leads to closed revenue in your CRM
- Calculate break-even ROAS using your profit margin
- Compare ROAS by campaign and channel
- Shift budget toward the highest-return campaigns
- Use Target ROAS bidding once you have enough data
What to Watch For
- Revenue versus profit. A high ROAS on low-margin products may still lose money.
- Long sales cycles. Revenue may arrive months after the ad spend.
- Attribution. Customers often see several touchpoints before buying.
- Missing offline sales. Phone and in-person sales need tracking too.
Return on Ad Spend FAQ
What is a good ROAS?
It depends on your margins. A business with high margins can profit at a lower ROAS than one with thin margins.
How is ROAS different from ROI?
ROAS measures revenue against ad spend. ROI measures profit against total investment.
How do I calculate break-even ROAS?
Divide 1 by your profit margin. A 25 percent margin requires a ROAS of 4 to break even.
Can service businesses use ROAS?
Yes, by tracking which ad leads become paying customers and their value.
What is Target ROAS?
A Google Ads bid strategy that aims for a specific return on ad spend.
Put It to Work
Want to know exactly what your ads earn? Riley will connect your ads to revenue and show where each dollar works hardest.
