Glossary · Revenue
Return on ad spend (ROAS)
Return on ad spend is the revenue attributed to advertising divided by the amount spent to earn it, over a chosen period and channel. It is expressed as a multiple: a 4× ROAS means €1 of spend produced €4 of revenue.
Formula
ROAS = ad revenue ÷ ad spend
Worked example
Meta, last 30 days
- Revenue from ads
- €40,000
- Ad spend
- €10,000
- ROAS
- 4.0×
A 4× ROAS only pays if the margin behind it does. Break-even ROAS is 1 ÷ contribution margin — on a 30% margin you need 3.3× just to cover the ad and the costs of the order.
Return on ad spend (ROAS) tells you how much revenue each euro of advertising brings back. A 4× ROAS means €1 of spend produced €4 of revenue. It is the headline ad metric — and the one most likely to flatter a business that is quietly losing money on every sale.
Why ROAS on its own can lie
ROAS measures revenue, not profit. A 4× ROAS sounds healthy until you remember product cost, shipping, and payment fees eat most of each order. What actually matters is whether the contribution margin an order produces covers what you paid to win it.
Your break-even ROAS is 1 ÷ contribution margin %. On a 30% margin you need a 3.3× ROAS just to cover the ad and the costs of the order — anything less loses cash. Always run ad spend through margin, not revenue alone.
Modelling paid revenue with ROAS
ROAS is what turns an ad budget into a revenue forecast. Split revenue into two streams — organic (what you'd earn with no ads) and paid — and model paid revenue as ad budget × ROAS. Now the budget is a lever: raise it and paid revenue follows at your ROAS.
| Jul | Aug | Sep | |
|---|---|---|---|
| Ad budget (€) | 5,000 | 6,000 | 8,000 |
| ROAS (×) | 4.0 | 4.0 | 4.0 |
| Paid revenue (€) | 20,000 | 24,000 | 32,000 |
How ROAS looks in Foreqast
Foreqast models budget, ROAS, and revenue together. Ad spend feeds from Meta, ROAS is a driver you can set or override, and paid revenue computes from the two — so a budget change flows through to revenue and, via margin, to cash.
| Forecast | Jul 26 | Aug 26 | Sep 26 |
|---|---|---|---|
| Revenue | €40,000 | €44,000 | €52,000 |
| Σ Paid revenue (budget × ROAS) | €20,000 | €24,000 | €32,000 |
| Ad budget | €5,000 | €6,000 | €8,000 |
| ROAS Manual | 4.0 | 4.0 | 4.0 |
ROAS is only safe to scale when you know the margin behind it. Read scaling ad budget without going broke for the payback check that keeps spend inside your margin.
Scale spend without outrunning your margin
Foreqast ties ad budget, ROAS, and margin together and simulates the cash impact — so you can see where a bigger budget pays back before you commit to it.
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