What Is ROAS and What's a Good ROAS for My Industry?
ROAS stands for return on ad spend. It's the revenue you get back for every dollar you put into a campaign, expressed as a ratio. A 4x ROAS means every $1 spent returned $4 in revenue. What counts as a good ROAS depends entirely on your profit margin, not on a number you saw in a blog post.
Across the Google Ads accounts we manage for Australian businesses, this is the question we get asked more than almost any other. And the honest answer is always the same: it depends what you sell.
In this guide:
- How ROAS Is Actually Calculated
- Why ROAS Alone Doesn't Tell You If You're Profitable
- What's a Good ROAS for My Industry?
- The Trap of Chasing a Higher ROAS Number
- How to Improve ROAS Without Breaking What's Working
- Frequently Asked Questions
How Is ROAS Actually Calculated?
ROAS is revenue divided by ad spend. Spend $1,000, generate $4,000 in revenue, and you've got a 4x ROAS. Google Ads calculates this automatically once conversion tracking is set up properly and revenue values are being passed through correctly.
The formula is simple. The mistake is in what people compare it to. A 4x ROAS sounds impressive until you find out the product has a 15% margin. At that point, 4x might mean you're barely breaking even once cost of goods, shipping, and overheads are accounted for.
Why ROAS Alone Doesn't Tell You If You're Profitable
This is the part most guides skip. ROAS measures revenue, not profit. If your margin is thin, a high ROAS can still mean you're losing money on every sale once real costs are factored in.
Work out your break-even ROAS before you look at a dashboard. If your margin is 25 percent, you need roughly a 4x ROAS just to cover the cost of the product. Anything above that is genuine profit. Anything below it and the campaign is costing you money, even though the number on screen looks fine.
This is one reason we push clients to fix conversion tracking before touching anything else. Without accurate revenue data flowing into Google Ads, ROAS numbers are close to meaningless. We saw this with a home renovation client in Adelaide. Once we fixed their conversion tracking, leads increased 41% and CPA dropped 43% in the first three months compared to their previous agency, simply because the account could finally optimise toward real numbers instead of guesses.
Read our guide on how to know if your Google Ads are actually working for a wider look at which numbers to trust and which to ignore.
What's a Good ROAS for My Industry?
There's no universal number, but here's roughly what we see across different business types managing Australian accounts.
- eCommerce, low margin, high volume: Often needs 5x or higher to be genuinely profitable, because product costs and shipping eat into margin fast.
- eCommerce, higher margin, niche products: Can be profitable at 2 to 3x depending on the category.
- Local service businesses (trades, cleaning, appliance repair): ROAS is usually the wrong metric here. These are lead generation businesses, not direct sales, so cost per lead matters more.
- High-ticket services (renovations, professional services): A single conversion can be worth thousands, so even a 1.5 to 2x ratio on ad spend to first contact can be extremely profitable once the full sales cycle plays out.
If your business runs on leads rather than direct online sales, ROAS often isn't the right metric at all. That's a separate conversation worth having with whoever manages your account before you set a target based on a number that doesn't apply to your business model. For a deeper look at what realistic cost per lead looks like in Australia, see our guide on how much Google Ads actually costs.
The Trap of Chasing a Higher ROAS Number
Once a campaign hits a ROAS target, the instinct is to push for more. This is where a lot of Australian businesses get it wrong. Pushing ROAS higher usually means narrowing targeting, cutting reach, or bidding more conservatively, and all three of those tend to shrink total revenue even while the ratio improves.
A campaign doing $10,000 revenue at 4x ROAS is often worth more to a business than one doing $4,000 revenue at 8x ROAS, even though the second number looks better on a dashboard. Total profit matters more than the ratio. We would rather see a client scale a 3.5x campaign that's growing than protect an 8x campaign that's shrinking.
How to Improve ROAS Without Breaking What's Working
Fix conversion tracking first
If revenue data isn't accurate, nothing downstream can be trusted. This is always step one, before touching bids or targeting. Our full walkthrough is in how to set up Google Ads conversion tracking.
Cut wasted spend on irrelevant search terms
One of our carpet cleaning clients in Sydney dropped their cost per lead from $108 to $70, largely through consistent search term and call tracking management, not a clever new strategy. Small, weekly clean-ups compound over time.
Let the algorithm see enough conversions
Smart Bidding needs conversion volume to optimise properly. Accounts with very few conversions a month often see unstable ROAS simply because there isn't enough data for Google's systems to learn from.
Frequently Asked Questions About ROAS
What is a good ROAS for Google Ads in Australia?
There's no single good number. It depends on your profit margin. A business with 60 percent margin can be profitable at 2x ROAS, while a business with 15 percent margin might need 5x or more just to break even.
Is a higher ROAS always better?
Not necessarily. A higher ROAS often comes from narrower targeting, which can shrink total revenue even while the ratio improves. Total profit usually matters more than the ratio itself.
How is ROAS different from ROI?
ROAS looks at revenue against ad spend only. ROI factors in all costs, including product cost, overheads, and other expenses, giving a truer picture of actual profitability.
Should service businesses track ROAS?
Not always. If leads convert to jobs over weeks or months rather than an instant sale, cost per lead and lead-to-job conversion rate are usually more useful metrics than ROAS.
Not Sure If Your ROAS Is Actually Good?
Most businesses chasing a bigger ROAS number are optimising the wrong thing. We start every account with margin and profit, not vanity ratios, which is part of why clients like the Adelaide renovation business above saw leads up 41 percent and CPA down 43 percent once the numbers behind the dashboard were fixed.
Talk to us about what a realistic ROAS looks like for your business.