# How to Measure Return on Ad Spend (ROAS) for Your Business
In the world of digital advertising, it is easy to get distracted by 'vanity metrics' like likes, clicks, or impressions. However, for an Australian small business owner, the only metric that truly determines if your marketing is working is Return on Ad Spend (ROAS). Knowing your ROAS allows you to stop guessing and start investing your budget where it actually generates revenue.
Why ROAS Matters
ROAS tells you exactly how many dollars in revenue you receive for every dollar you spend on advertising. If you spend $1,000 on Google Ads and generate $5,000 in sales, your ROAS is 5:1 (or 500%). Without this visibility, you could be spending money on campaigns that look busy but are actually costing your business money.---
Prerequisites: What You’ll Need
Before you can accurately measure ROAS, ensure you have the following in place:- Conversion Tracking: A Facebook Pixel, Google Tag, or LinkedIn Insight Tag installed on your website.
- Revenue Data: Access to your e-commerce dashboard (like Shopify or WooCommerce) or a CRM to track lead values.
- Ad Spend Records: Access to your Google Ads, Meta Ads, or Microsoft Advertising accounts.
- A Calculator: Or a simple spreadsheet to track your monthly performance.
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Step 1: Define Your Conversion Goals
Before calculating ROAS, you must decide what a 'conversion' is worth. For an e-commerce store, this is easy—it’s the transaction value. For a service-based business (like a plumber in Brisbane or an accountant in Sydney), you need to assign a 'Lead Value'. Screenshot Description: In Google Ads, navigate to 'Goals' > 'Conversions'. You should see a list of actions like 'Purchase' or 'Contact Form Submit' with a column for 'Value'.Step 2: Extract Your Total Ad Spend
Log into your advertising platform and set your date range (e.g., the last 30 days). You are looking for the total 'Amount Spent'. Ensure you include all costs, including any management fees if you are paying an external freelancer, to get a 'True ROAS'.Step 3: Identify Your Total Revenue Generated
In the same platform, look for the 'Conversion Value' column.- For E-commerce: This is the total value of sales attributed to your ads.
- For Lead Gen: Multiply the number of leads by your average lead value (e.g., 10 leads x $100 average value = $1,000).
Step 4: Use the ROAS Formula
The formula is simple: Total Revenue ÷ Total Ad Spend = ROASFor example, if your Brisbane boutique spent $2,000 on Instagram Ads and sold $10,000 worth of stock: $10,000 / $2,000 = 5. Your ROAS is 5x or 500%.
Step 5: Calculate Your 'Break-Even' ROAS
This is a step many business owners skip. You have costs beyond advertising (GST, shipping, staff, cost of goods).- Calculate your Gross Margin percentage (e.g., 60%).
- Divide 1 by your Gross Margin (1 / 0.60 = 1.66).
- Your break-even ROAS is 1.66x. Anything above this is profit; anything below is a loss.
Step 6: Factor in the Australian Context (GST)
Remember that Australian Facebook and Google invoices often include GST if you haven't provided an ABN or if the entity is Australian-based. Ensure you are calculating your spend consistently—either all inclusive of GST or all exclusive—so your data isn't skewed by 10%.Step 7: Analyse Data by Campaign
Don't just look at the account total. Look at individual campaigns. You might find your 'Brand Awareness' campaign has a ROAS of 1.2x, while your 'Retargeting' campaign has a ROAS of 12x. This helps you decide where to shift your budget.Step 8: Account for 'Attribution Windows'
Not everyone buys the second they click an ad. Some people click on Monday and buy on Friday. Most platforms use a 7-day or 30-day 'attribution window'. Check your settings to ensure you aren't undercounting sales that happened a few days after the initial click.Step 9: Set Up Automated Reporting
To save time, use a tool like Google Looker Studio to create a dashboard. This pulls data directly from your ads and displays your ROAS in real-time, so you don't have to manually calculate it every week. Screenshot Description: A Looker Studio dashboard showing a large 'Scorecard' metric with a percentage increase/decrease arrow next to the ROAS figure.Step 10: Review and Optimise
Once you have your figures, it’s time to act. If a campaign is below your break-even ROAS, pause it or change the creative. If it’s significantly above your target, consider increasing the daily budget to scale your results.---
Pro Tips for Success
- Include the 'Hidden' Costs: For a true reflection of profitability, include your agency management fees in your 'Spend' column. We call this 'mROAS' (Marketing ROAS).
- Look at Lifetime Value (LTV): A 2x ROAS might look bad today, but if that customer comes back 5 times a year without clicking another ad, that first ad spend was a massive win.
- Don't Panic Over Daily Fluctuations: ROAS can swing wildly day to day. Always look at 7-day or 30-day trends before making major changes.
Common Mistakes to Avoid
- Double Counting: Ensure you aren't counting the same sale in both Google Ads and Facebook Ads (this happens if a user clicks both). Use Google Analytics 4 (GA4) to see a 'de-duplicated' view.
- Ignoring Offline Conversions: If someone sees an ad and then walks into your physical store in Brisbane to buy, your digital ROAS won't show it. Consider using 'Store Visit' tracking or asking customers "How did you hear about us?"
- Setting Unrealistic Targets: A 10x ROAS is great, but for many industries, a 3x or 4x ROAS is a very healthy, sustainable target.
Troubleshooting Common Issues
Problem: My ROAS is showing as 0, but I know I've made sales.- Solution: Check your tracking tags. Use the 'Google Tag Assistant' Chrome extension to see if your conversion tags are firing correctly on your 'Thank You' page.
- Solution: This is normal. Facebook tracks based on people who saw/clicked an ad, whereas Shopify tracks all sales. Use GA4 as your "source of truth" for a middle-ground perspective.
- Solution: Re-calculate your break-even point. Your margins might be thinner than you realised, or your 'Cost of Goods Sold' (COGS) may have increased.
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Next Steps
Now that you know how to measure your ROAS, the next step is to improve it. You can do this by refining your audience targeting or improving your website's conversion rate.If you're struggling to get your tracking set up correctly or your ROAS isn't reaching the levels you need to grow, our team at Local Marketing Group is here to help. We specialise in helping Australian businesses scale through data-driven advertising.
Contact Local Marketing Group today for a free audit of your current ad performance.