marketing calculator

ROAS to ROI Conversion & COGS Calculator

Convert Return on Ad Spend (ROAS) to true Return on Investment (ROI) by factoring in Cost of Goods Sold (COGS) and overhead.

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Saved Runs

Inputs

Ad spend$

ROASx

Average Order Value (AOV)$

COGS per unit%

Shipping cost per unit$

Merchant fee%

Merchant fee fixed$

Allocated overhead$

Results

True ROI %

19.76%

Generated Revenue$3,000.00

Total Net Profit$495.00

Break-Even ROAS Required2.12x

Total COGS & Shipping$1,200.00

Total Processor Fees$105.00

Bookmark this ROAS to ROI Calculator

Save this page to analyze ecommerce profitability, set target ROAS limits, and audit ad agency reports.

Formula

ROAS to ROI & COGS formula

ROI = (Revenue - Total Cost) / Total Cost × 100. Break-Even ROAS = (1 + Overhead / Ad Spend) / (1 - Variable Cost Ratio).

This calculation incorporates COGS, shipping, transaction fees, and fixed overhead into campaign economics.

Step by step

How the calculation works

1Enter direct ad spend and platform-reported Return on Ad Spend (ROAS).
2Specify product cost of goods sold (COGS %) and shipping cost per package unit.
3Set merchant payment processor fees (percentage and fixed per-order charge).
4Allocate monthly campaign overhead to discover true bottom-line ROI and required break-even targets.

Related guides

Learn more about this calculation

Guide

Paid Media Metrics Guide: CPC, CPM, CTR, CPA, ROAS, and ROI in Plain English

Understand the paid media metrics that actually matter. Learn how CPC, CPM, CTR, CPA, ROAS, and ROI connect, when to use each one, and how to avoid reporting cheap traffic as business success.

Site Guide

How to Use Do The Calculation Calculators: A Practical Step-by-Step Guide

Learn the fastest reliable workflow for using Do The Calculation calculators, reading results, checking formulas, and using save, print, share, and export actions correctly.

How to understand and use this calculator

Why ROAS hides the true profitability of ad spend

Return on Ad Spend (ROAS) is a popular metric because ad platforms report it natively. But ROAS only measures top-line revenue divided by ad spend. It ignores the cost of goods sold (COGS), warehouse shipping, payment processor charges, and monthly overhead.

An ad campaign with a 300% ROAS ($3.00 returned for every $1.00 spent) looks successful. But if your COGS is 50%, shipping is $5.00, and fees are 3%, that 300% ROAS is actually losing money. Use this calculator to uncover true profitability, and monitor lead costs using the CPL calculator or determine the absolute minimum ROAS using the break-even ROAS calculator.

The ROAS to ROI mathematical formulas

True profitability and break-even targets are modeled using these unit economic equations:

$$\text{Revenue} = \text{Ad Spend} \times \text{ROAS}$$

$$\text{Units} = \frac{\text{Revenue}}{\text{AOV}}$$

$$\text{Total COGS} = \text{Revenue} \times \left(\frac{\text{COGS (\%)}}{100}\right)$$

$$\text{Total Fees} = \text{Revenue} \times \left(\frac{\text{Processor Fee (\%)}}{100}\right) + \text{Units} \times \text{Processor Fixed Fee}$$

$$\text{Total Shipping} = \text{Units} \times \text{Shipping Cost Per Unit}$$

$$\text{ROI (\%)} = \frac{\text{Revenue} - \text{Total Cost}}{\text{Total Cost}} \times 100$$

Where Total Cost equals the sum of Ad Spend, COGS, Shipping, Fees, and Overhead. The Break-Even ROAS is the ad multiplier required to achieve a Net Profit of zero, solved as:

$$\text{Break-Even ROAS} = \frac{1 + \frac{\text{Overhead}}{\text{Ad Spend}}}{1 - \text{Variable Cost Ratio}}$$

Where the variable cost ratio is the sum of COGS%, shipping cost ratio, and payment fees.

Managing variable costs to scale profit margins

If your variable costs are too high, scaling ad spend will only accelerate your losses. Use this tool to run sensitivity analyses: see how negotiating shipping rates or improving AOV affects your break-even ROAS target. Compare your unit economics against the CLV to CAC ratio calculator to analyze long-term customer value.

Related concepts

Variable Cost Ratio

The percentage of product price consumed by COGS, shipping, and fees.

Break-Even ROAS

The minimum return on ad spend required to cover all campaign and unit costs.

True ROI

Net profit divided by all campaign costs, including media and non-media overheads.

Frequently Asked Questions

What is the main difference between ROAS and ROI?+

ROAS only measures revenue relative to ad spend; ROI measures net profit relative to all costs including COGS, fees, and overhead.

How do you calculate break-even ROAS?+

Divide (1 + overhead / spend) by (1 - variable cost ratio), where variable cost ratio includes COGS %, shipping, and transaction fees.

Why does my ROAS look profitable but I am losing money?+

Because your gross margin is not high enough to cover product costs, shipping, payment processing fees, and overhead.

What is COGS?+

Cost of Goods Sold, representing the direct costs of manufacturing or purchasing the products sold.

How do payment processing fees affect ROI?+

Processing fees (e.g. 2.9% + $0.30) take a bite out of every transaction, lowering your net margin.

Can this tool calculate ROAS if I enter revenue instead?+

Yes, if you enter revenue and ad spend, the calculator derives your ROAS.

What does a variable cost ratio mean?+

The sum of all costs that scale with every unit sold, represented as a percentage of the product price.

How does AOV affect my break-even ROAS?+

A higher AOV spreads fixed shipping and transaction fees across more revenue, lowering your break-even ROAS target.

Should I include monthly software tools in overhead?+

Yes, any fixed software or team cost allocated to running your campaigns should be included in overhead.

What is a good true ROI target for ecommerce?+

A true campaign ROI of 20% to 50%+ after all costs is considered healthy for ecommerce brands.

What happens if my variable cost ratio exceeds 1?+

It means you are losing money on every unit sold before ad spend. The calculator returns zero break-even ROAS, indicating that no ROAS can achieve profitability.

How do I lower my break-even ROAS?+

Increase your AOV, negotiate lower shipping rates, reduce COGS, or lower campaign overhead.

How the calculation works

1Enter direct ad spend and platform-reported Return on Ad Spend (ROAS).

2Specify product cost of goods sold (COGS %) and shipping cost per package unit.

3Set merchant payment processor fees (percentage and fixed per-order charge).

4Allocate monthly campaign overhead to discover true bottom-line ROI and required break-even targets.

How to understand and use this calculator

Why ROAS hides the true profitability of ad spend

The ROAS to ROI mathematical formulas

True profitability and break-even targets are modeled using these unit economic equations:

$$\text{Revenue} = \text{Ad Spend} \times \text{ROAS}$$

$$\text{Units} = \frac{\text{Revenue}}{\text{AOV}}$$

$$\text{Total COGS} = \text{Revenue} \times \left(\frac{\text{COGS (\%)}}{100}\right)$$

$$\text{Total Fees} = \text{Revenue} \times \left(\frac{\text{Processor Fee (\%)}}{100}\right) + \text{Units} \times \text{Processor Fixed Fee}$$

$$\text{Total Shipping} = \text{Units} \times \text{Shipping Cost Per Unit}$$

$$\text{ROI (\%)} = \frac{\text{Revenue} - \text{Total Cost}}{\text{Total Cost}} \times 100$$

Where Total Cost equals the sum of Ad Spend, COGS, Shipping, Fees, and Overhead. The Break-Even ROAS is the ad multiplier required to achieve a Net Profit of zero, solved as:

$$\text{Break-Even ROAS} = \frac{1 + \frac{\text{Overhead}}{\text{Ad Spend}}}{1 - \text{Variable Cost Ratio}}$$

Where the variable cost ratio is the sum of COGS%, shipping cost ratio, and payment fees.

Managing variable costs to scale profit margins

Related concepts

Variable Cost Ratio

The percentage of product price consumed by COGS, shipping, and fees.

Break-Even ROAS

The minimum return on ad spend required to cover all campaign and unit costs.

True ROI

Net profit divided by all campaign costs, including media and non-media overheads.

Frequently Asked Questions

What is the main difference between ROAS and ROI?+

ROAS only measures revenue relative to ad spend; ROI measures net profit relative to all costs including COGS, fees, and overhead.

How do you calculate break-even ROAS?+

Divide (1 + overhead / spend) by (1 - variable cost ratio), where variable cost ratio includes COGS %, shipping, and transaction fees.

Why does my ROAS look profitable but I am losing money?+

Because your gross margin is not high enough to cover product costs, shipping, payment processing fees, and overhead.

What is COGS?+

Cost of Goods Sold, representing the direct costs of manufacturing or purchasing the products sold.

How do payment processing fees affect ROI?+

Processing fees (e.g. 2.9% + $0.30) take a bite out of every transaction, lowering your net margin.

Can this tool calculate ROAS if I enter revenue instead?+

Yes, if you enter revenue and ad spend, the calculator derives your ROAS.

What does a variable cost ratio mean?+

The sum of all costs that scale with every unit sold, represented as a percentage of the product price.

How does AOV affect my break-even ROAS?+

A higher AOV spreads fixed shipping and transaction fees across more revenue, lowering your break-even ROAS target.

Should I include monthly software tools in overhead?+

Yes, any fixed software or team cost allocated to running your campaigns should be included in overhead.

What is a good true ROI target for ecommerce?+

A true campaign ROI of 20% to 50%+ after all costs is considered healthy for ecommerce brands.

What happens if my variable cost ratio exceeds 1?+

It means you are losing money on every unit sold before ad spend. The calculator returns zero break-even ROAS, indicating that no ROAS can achieve profitability.

How do I lower my break-even ROAS?+

Increase your AOV, negotiate lower shipping rates, reduce COGS, or lower campaign overhead.

ROAS to ROI Conversion & COGS Calculator

Inputs

Results

Bookmark this ROAS to ROI Calculator

ROAS to ROI & COGS formula

How the calculation works

Learn more about this calculation

Paid Media Metrics Guide: CPC, CPM, CTR, CPA, ROAS, and ROI in Plain English

How to Use Do The Calculation Calculators: A Practical Step-by-Step Guide

ROAS to ROI Conversion & COGS Calculator

Inputs

Results

Bookmark this ROAS to ROI Calculator

Key output metrics

Ad Campaign Unit Economics

How to understand and use this calculator

Why ROAS hides the true profitability of ad spend

The ROAS to ROI mathematical formulas

Managing variable costs to scale profit margins

Related concepts

Frequently Asked Questions

ROAS to ROI & COGS formula

How the calculation works

Learn more about this calculation

Paid Media Metrics Guide: CPC, CPM, CTR, CPA, ROAS, and ROI in Plain English

How to Use Do The Calculation Calculators: A Practical Step-by-Step Guide

Key output metrics

Ad Campaign Unit Economics

How to understand and use this calculator

Why ROAS hides the true profitability of ad spend

The ROAS to ROI mathematical formulas

Managing variable costs to scale profit margins

Related concepts

Frequently Asked Questions