What Is ROAS and How Do You Calculate the Right Target ROAS?

ROAS sounds complicated. It isn't. Let's sell a laptop.

1. What is ROAS?

You sell a laptop for $1,000, and Google Ads costs you $100 to generate the sale.

Revenue

$1,000

Google Ads

$100

ROAS

10.0

$1,000 ÷ $100

For every $1 spent on Google Ads, you generated $10 in sales. That's ROAS: Return On Ad Spend, the $1,000 return you are getting on $100 of ad spend.

But did you make money?

2. Is a 10.0 ROAS profitable?

Let's add the costs.

Item	Amount
Selling price	$1,000
Purchase price	$650
Shipping	$20
Payment fees	$20
Google Ads	$100
Left over	$210

You have $210 left from a $1,000 sale. That's a 21% CM2 margin, the margin left after buying and shipping the goods and paying payment fees and Google Ads.

Great. But here's the important question:

3. How much CM2 do you actually need?

There is no magic percentage that works for every business, so start with a benchmark. Research normal CM2 or contribution margins for your type of ecommerce business. Ask your accountant, look at industry benchmarks, or simply ask an AI tool:

As a practical starting point, you might find something like this:

CM2 margin	Assessment
Below 10%	Risky
10 to 15%	Acceptable, but tight
15 to 20%	Healthy
Above 20%	Very healthy

Then compare that with your own historical numbers, overhead and the profit you want your business to make. For our imaginary electronics webshop, let's use a minimum CM2 of 18%.

4. What will customers actually pay?

The market matters too. Look at comparable laptops.

Too expensive

$1,200

Too cheap

$800

The sweet spot

$1,000

So the realistic selling price is $1,000. Now we know three crucial numbers:

Purchase price

$650

Realistic selling price

$1,000

Minimum CM2

18%

Now we can calculate what Google is allowed to spend.

5. Calculate the minimum money you want to keep

18% of $1,000 is $1,000 × 18% = $180. After buying and shipping the laptop, paying the payment fees and paying Google Ads, we want at least $180 left.

Now work backwards:

Item	Amount
Selling price	$1,000
Purchase price	$650
Shipping	$20
Payment fees	$20
Minimum CM2 we want to keep	$180
Left for Google Ads	$130

That's what we can afford to spend on Google Ads to generate the sale.

6. Now calculate your Target ROAS

Revenue Google should generate

$1,000

Google may spend

$130

Target ROAS

7.7

$1,000 ÷ $130 = 7.69, or 770%

That's it. We didn't guess 7.7, and Google didn't decide it for us. We calculated it from the economics of the sale.

Google was originally generating the sale for $100, giving us a ROAS of 10.0. That's fantastic.

But we've now calculated that Google can spend up to $130 and we'll still achieve our required 18% CM2 margin. So we don't necessarily need a Target ROAS of 10.0. Our business economics tell us that 7.7 is enough.

7. But what if you sell thousands of products?

This was just one laptop. But what if your webshop sells thousands of products with different purchase prices, selling prices, shipping costs, payment costs and margins? That's where it gets more complicated.

And since August 2026, Google takes the target you set more seriously than before. Read what Google's "Review your campaign targets" notice actually means for budget-limited campaigns.

Need help finding your Target ROAS?

At Wolf+Bär, we help ecommerce businesses calculate the Target ROAS they actually need to grow profitably. Whether you sell a handful of products or thousands, we can help you find the number that works for your business. We'll answer one simple question: is the Target ROAS you're giving Google actually the right one for your business?