ROI vs ROAS: how to calculate both

Two formulas, two questions

ROI and ROAS both start from the same two numbers — what you spent and what came back — but they answer different questions.

ROI asks: how much profit did I make, as a percentage of what I spent?

ROI = (Revenue − Spend) ÷ Spend × 100

ROAS asks: how many units of revenue did each unit of spend return?

ROAS = Revenue ÷ Spend

Spend 50,000 and earn 1,50,000 and you have a 200% ROI and a 3.0x ROAS — the same campaign, told two ways.

Why ROAS alone misleads

ROAS ignores costs. A 3x ROAS sounds healthy until you subtract what the product cost to make, the payment fees, and the overheads. If your cost of goods is 60% of revenue, a 3x ROAS on 50,000 of spend earns 1,50,000 in revenue but only about 60,000 in gross profit — and after overheads the campaign may barely clear break-even.

That is the trap: ROAS measures revenue returned, not profit made. ROI and gross margin are what tell you whether the campaign actually made money.

What counts as a good number?

There is no universal bar, but two rules help:

• ROI should beat your cost of capital plus the effort of running the campaign. Positive is not enough if the same money earns more elsewhere.
• ROAS should clear your gross margin: a rough floor is 1 ÷ gross margin. At a 30% gross margin you need roughly 3.3x ROAS just to break even. Below that, a "profitable" campaign is quietly losing money.

Our profit margin calculator gives you the margin figure that sets that ROAS floor.

Read both together

Use ROAS to compare campaigns at a glance — it moves with creative, audience, and spend. Use ROI to decide whether the whole thing is worth doing. The ROI calculator returns both from a spend and a revenue figure, so you can sanity-check a channel in seconds instead of arguing about the headline.

The wider lesson is the one behind all of our business guides: a percentage only means something once you know what it is a percentage of.