Same ROAS. Different business results.

Two stores report a ROAS of 5. Each attributes RON 10,000 in orders to RON 2,000 of advertising spend. On the slide, the results look identical.

You can have an encouraging report and, at the same time, questions about the money left in the business. For a budget decision, it is useful to link the campaign figures to the costs you already know.

But the stores buy their stock and fulfill their orders under different conditions. Their costs, discounts and returns may differ. So can the money left after each sale.

To decide whether and where to invest, we also need to understand this part of the result.

How much can you spend to win a new customer?

The limit comes from the customer’s economic contribution, the acquisition costs you include and the period in which the company can recover the investment. ROAS alone does not show that limit. We separate new customers from existing ones and avoid treating every order as a different customer.

For a usable calculation, we state whether we include only media spend or also creative, management and sales costs. The number of customers has to match those costs and the period analyzed, allowing for the delay before sales happen. An order that appears in two platforms does not become two acquisitions.

Can you accept a cost higher than the contribution of the first order? Sometimes, if repeat purchasing is documented and the company can sustain the later recovery. We also check the scenario in which the customer does not return. An estimated future value should not be presented as money that is already available.

What does ROAS tell us?

ROAS is conversion value divided by advertising spend. In this example, conversion value is the revenue attributed to orders. Google documents this value-to-cost calculation. Google Ads: ROAS definition

The formula is straightforward; the inputs still need checking.

• Does the value include VAT?
• Are cancellations removed?
• How are returns handled?
• Does it represent purchases, or have other actions been assigned values too?

The same metric name can conceal different configurations. Check what both the numerator and denominator represent before comparing.

Same sales, different costs

The example is hypothetical, with all values excluding VAT. Variable costs here include merchandise and the other direct costs chosen for the comparison. It does not represent any client’s data.

The last line shows the amount left for other expenses and possible profit. It is not net profit: there can be wages, rents, fees, production costs of the campaign and taxes, depending on what we have already included.

That is why a ROAS target borrowed from another business may be inappropriate. Even in the same store, two categories of products can support different investments.

What a simple calculation can tell us

Suppose that, after the defined variable costs and before advertising, RON 40 of every RON 100 of revenue remains. In this simplified model, RON 40 is the most advertising can cost before this contribution turns negative.

The 100/40 ratio is 2.5. This is a theoretical threshold under the given conditions, before costs that were not included. It is not a recommended target or proof that the business would profit at that level.

A working target should account for the desired margin, full costs, uncertainty and funding capacity. If it depends on future customer purchases, use evidence about repeat buying rather than assuming it will happen.

Margin percentage and money left over can point to different priorities

Suppose we are choosing between two fictional products. The first leaves RON 60 from RON 100 of revenue; the second leaves RON 150 from RON 500 of revenue, after the same categories of variable costs and before advertising. The first has the higher contribution percentage, 60% against 30%. The second leaves more money from every order.

This calculation does not decide on its own what we promote. It also matters what it costs to win the order, how many orders we can generate on sustainable terms and what resources fulfillment uses. If the products are often bought together, we also check the economics of the whole order, rather than assigning the same advertising cost to each product arbitrarily.

For services, the comparison can include working hours, collaborators and the cost of taking on the project. An offer with higher revenue can take up a disproportionate share of the team’s capacity. That is why the client confirms which costs and limits realistically describe the work.

A useful analysis shows both the percentage and the amount left over, on the same basis. It then relates them to volume, resources and the objective. Choosing which products or offers to promote is covered in “Which product should you promote first?”

What else needs to be checked

Revenue attributed to an ad does not, by itself, show how much additional revenue the ad produced. Some people might have bought without that interaction. The question of incremental contribution needs separate analysis.

We also check when payment arrives, which orders remain incomplete and whether the business can finance its stock. Higher volume may require cash before the revenue reaches the account.

ROAS remains a useful benchmark for assessing advertising, used together with correct definitions and relevant economic information.

How we use this information

At NOT MORE., we discuss the business objective and the information needed to assess it. Recommendations can differ by product category, offer and stage of the customer relationship. We explain which conclusions the data supports and what is still missing.

In a useful report, sales growth and economic contribution growth are monitored separately when we have the necessary data.

Three questions before the next budget increase

• What exact value do we send to the platform and how do we update it?
• Which costs have been deducted, and which are still missing?
• How much do we want left after the additional investment?

What remains after the sales attributed to the campaign?

Choose a product or category for which you know the revenue, costs and advertising investment. We’ll discuss what can be compared and what data is missing before a budget recommendation.

Who confirms the data behind the conclusion

The client’s team supplies and validates the commercial information it holds: orders, cancellations, returns, product costs and delivery costs. NOT MORE. defines the agreed analysis, checks how the data connects and explains the assumptions and limits of the calculation. Where included, we also implement the collection process or report it needs.

We then use the findings in decisions we manage, such as budget, product selection or messaging, within the approved remit. A report becomes useful when it shows what we should change and what still needs confirmation before making a decision.