A ROAS of 4 means the platform attributes £4 of revenue to every £1 spent on ads. It tells you nothing on its own about the amount left after fulfilling those orders. Two stores can have the same ROAS and very different bank balances.
Use a consistent revenue basis
Suppose an ad platform reports £12,000 in revenue against £3,000 of spend. That is ROAS 4. If the revenue includes 20% VAT on standard-rated UK goods, it becomes £10,000 excluding VAT. Your ROAS on that basis is 3.33, before accounting for refunds or attribution overlap.
First check what your purchase event actually sends. Do not assume the advertising dashboard and your store’s sales report use the same treatment of tax, shipping or discounts.
Same ROAS. Different outcomes.
| Metric | Store A | Store B |
|---|---|---|
| Net revenue | £12,000 | £12,000 |
| Ad spend | £3,000 | £3,000 |
| Contribution margin before ads | 40% | 20% |
| Contribution before ads | £4,800 | £2,400 |
| Contribution after ads | £1,800 | −£600 |
Store A has money left towards overhead and profit. Store B is losing money before paying either. Both show ROAS 4 on the same revenue basis.
Find your break-even return
At a 40% contribution margin, the result is 2.5. At 20%, it is 5. This is an operating guide before fixed costs, not a promise of net profitability. A target above that floor must leave room for agency fees, overhead and the profit you want.
Do not add platform revenues together
Someone can see a Meta ad, search on Google and then buy. Each platform may claim the same order under its own attribution rules. Adding those attributed revenues creates sales that never happened. Reconcile against your store’s actual orders and use a blended measure alongside channel reports.
What to ask at your next review
- Is reported revenue inclusive or exclusive of VAT and refunds?
- Which product groups are driving the result, and at what contribution margin?
- How much contribution remains after all paid-media spend?
- How many new customers did we acquire, and how long does payback take?
- Are we buying additional demand or claiming sales that would have happened anyway?
ROAS is useful for diagnosing campaigns. Your margin, verified orders and total costs decide whether those campaigns are working for the business.
Examples are illustrative, not client results. VAT examples assume a VAT-registered UK business selling standard-rated goods, with recoverable input VAT excluded from costs. Check your own product and tax treatment with your accountant. UK VAT rates. Irish stores should use their applicable local VAT rate, not the UK example.
Put it into practice
Bring your store’s numbers to the conversation. We will start there.
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