Calculate Return On Ad Spend (ROAS)
1. Sign in to your revenue tracking platform or payment processing service like Shopify, PayPal, Stripe, or Google Analytics, to find the revenue generated from advertising.
If you have the advertising platform set up to track your revenue, then you can find this information there as well. If you are an e-commerce business you might use Shopify as the platform to track your sales and revenue. If that is the case, then go to your Shopify backend to see your stats. Go to the section where it says Sales and Revenue to find the revenue number.
2. Go to the section where it says Sales and Revenue to find the revenue number.
For Example: On Stripe, go to the Payments tab to find your revenue. On PayPal, go to the Activity tab and select the transaction type to only show payments received.
3. Go to your advertising platform such as Facebook, Google, or Bing, to check the performance of your campaigns.
If you are advertising on Google Ads, sign in to your advertising account and go to the Campaigns tab to see your advertising stats. If you are on Facebook sign in to your Facebook Ads Manager account and go to the Campaigns tab to see your advertising account.
4. Find your advertising spend by looking at the Amount Spent column and checking the Total Spent at the bottom.
For example, in 2020 we spent $20,591 in advertising for the whole year.
5. Calculate your Return On Ad Spend (ROAS) by using this formula: ROAS =(Revenue/Spend)
Return On Ad Spend (ROAS) shows the performance of your advertising campaign to generate revenue for your business. Example: Spent $1000 on ads and generated $3000 in revenue. ROAS = $3000 / $1000 = $3 or 300% return on advertising spend. Spent $16,585 on ads and generated $69,340 in revenue. ROAS = $69,340 / $16,585 = $4.18 or 418% return on advertising spend. ROAS tells at what level a marketing channel is performing compared to other channels. You can also use it to track specific campaigns to know which one is generating more return on investment.
6. Use the ROAS number to compare other marketing channels' performance.
For example, you can compare Facebook Advertising ROAS to Google Advertising ROAS, to see where you are generating a better return. Based on that, you can allocate a greater amount of your funds to the platform, generating a better ROAS.