01ROAS in one line
Return on ad spend is revenue from ads divided by what the ads cost. £12,000 of sales from £3,000 of spend is a ROAS of 4x, which Google Ads shows as 400%. The two are the same number written differently, and you enter Target ROAS as the percentage.
ROAS on its own says nothing about profit. A 4x return is excellent at a 60% margin and a loss at a 20% one. That is why the next tab matters more than this one.
02Break-even ROAS, and why margin alone is not enough
Break-even ROAS is the return at which ad spend exactly uses up the profit on the sale. The formula is one divided by your margin: at 40%, every £1 of ads has to bring back £2.50 in sales just to stand still, so break-even is 2.5x, or 250%.
The common mistake is using product margin alone. Shipping, packing, payment fees and returns all come out of the same pound. Take 6% for order costs and 3% for returns off a 40% margin and the real margin is 31%, which moves break-even from 250% to 323%. Every campaign running between those two numbers looks profitable and is not.
03Setting a Target ROAS
A target is break-even adjusted for how much of the profit you are willing to hand to Google. Spend all of it and you are at break-even: lots of volume, nothing left. Spend half and the target doubles. With a 34% margin after costs, break-even is 294% and spending half the profit gives a target of 588%.
The "orders per customer" box is for shops with real repeat business. If customers reliably place three orders, you can afford to pay more for the first one, and the target falls. Use it carefully: Google only ever sees the first order, so a lifetime target leans entirely on your repeat data being right. The unit economics calculator works this through properly.
Whatever the maths says, move an existing campaign towards a new target in steps rather than in one jump. A sudden large change to Target ROAS usually throttles volume while the bidding readjusts.
04POAS, and when to switch to it
Profit on ad spend replaces revenue with gross profit: sales minus product cost and order costs, divided by ad spend. Its big advantage is that 100% always means break-even, whatever the product mix. Above 100% is profit, below it is a loss, and nobody has to remember the margin.
ROAS has to assume one average margin across everything you sell. If your range mixes 15% and 60% margin products, a single ROAS target over-bids on the thin ones and under-bids on the rich ones. When that is the case, feeding profit rather than revenue into Google Ads as the conversion value is usually worth the setup.