Paid Advertising
Return on Ad Spend (ROAS)
The revenue you earn for every dollar spent on advertising, calculated by dividing revenue from ads by the ad spend that produced it.
Definition
Return on Ad Spend measures how much revenue your advertising generates per dollar spent, usually expressed as a ratio like 4:1 or as a percentage. It's the headline efficiency metric for campaigns where you can tie ad spend to actual sales revenue.
In depth
ROAS connects spend to revenue in one number. A 4:1 ROAS means every $1 of ad spend brought back $4 in signed-job revenue. It's a natural fit for a contractor who can tie ad spend to the value of booked jobs, because it speaks the language of the income statement rather than clicks or impressions.
For budget decisions, ROAS tells you whether to scale up or pull back. As long as your ROAS comfortably clears your break-even point, spending more usually means making more. The catch is that ROAS is revenue-based, not profit-based, so a strong ROAS can still lose money if your margins are thin.
ROAS and CPA are two views of the same thing, and which one to lead with depends on the business. We use ROAS where revenue per conversion is known and varies, and lean on cost per acquisition for lead-gen where every customer is worth roughly the same. The danger is optimizing to ROAS while ignoring lifetime value, which can starve the campaigns that bring in your best long-term customers.
The formula
ROAS = Revenue from Ads ÷ Ad Spend Worked example
Spend $5,000 on ads that drive a $20,000 bathroom remodel in tracked revenue and your ROAS is 4:1, or 400%. If your break-even is 2:1, that campaign has room to scale.
Paid Advertising
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