Your Ideal ROAS Target Calculator

Use this calculator to set ideal Return on Ad Spend (ROAS) targets and ensure your advertising is profitable. ROAS measures the revenue generated for every dollar spent on advertising.

How to Use This Tool

1. Choose Your Method: Select “Product Profit Margin” for focusing on individual sales or “Customer Lifetime Value (LTV)” for businesses with repeat customers.
   
2. Enter Your Data: Input the required numbers for your chosen method. See the definitions below if you need help.
   
3. Calculate & Review: Click “Calculate ROAS Targets” to see your results.
   

Understanding Your Results

• Breakeven ROAS: The minimum ROAS needed to cover your ad costs and break even on a sale.
  
• Target ROAS: Your ideal ROAS to cover ad costs and achieve your desired profit on the ad spend.
  
• Maximum Allowable CAC: The most you should spend to acquire a new customer based on their lifetime value and your target LTV:CAC ratio.
  
• Target Initial ROAS: The immediate ROAS to aim for from a customer’s first purchase. A return below 1:1 is common in LTV models, as profitability is realized over the customer’s lifetime.

Input Definitions

• Gross Profit Margin (%): Profit percentage after the cost of goods sold (COGS).
  
• Desired Profit % on Ad Spend (%): The profit you want to make on top of your ad costs.
  
• Customer Lifetime Value (LTV) ($): Total expected revenue from one customer over time.
  
• Average Order Value (AOV) ($): The average amount a customer spends per order.
  
• LTV Gross Margin (%): Gross profit percentage from a customer’s LTV, excluding acquisition ad costs.
  
• Target LTV:CAC Ratio: Your desired ratio of Lifetime Value to Customer Acquisition Cost (e.g., 3:1).