What is a Good ROAS for Facebook Ads (Meta Ads)?

Have you ever launched a Facebook ad campaign, spent a good chunk of your marketing budget, and then found yourself staring at the metrics wondering, "Is this actually working?" You're not alone!

Return on Ad Spend (ROAS) is one of those metrics that seems straightforward but can leave even experienced marketers scratching their heads. Is 2x good? Should you be aiming for 4x? Why is your competitor bragging about their 10x ROAS when you're struggling to break even?

In this guide, we'll demystify ROAS for Meta ads, help you understand what makes a "good" ROAS for your specific business, and know when you should be looking beyond this metric altogether. Let's dive in!

What is ROAS and Why Does it Matter?

ROAS stands for Return on Ad Spend. Simply put, it measures how much revenue you generate for every dollar you spend on advertising.

Think of it as a straightforward way to answer the question: "If I put $1 into this Meta ad campaign, how many dollars do I get back?"

ROAS is typically expressed as a ratio or number. For example:

• A 2:1 ROAS (or 2x ROAS) means you're making $2 for every $1 spent
• A 5:1 ROAS (or 5x ROAS) means you're making $5 for every $1 spent

Why does this matter so much? Because unlike many vanity metrics in digital marketing (likes, shares, etc.), ROAS directly ties your marketing efforts to your bottom line. It helps you understand if your ad dollars are actually generating revenue or just disappearing into the Meta void.

If you're a small business wondering whether Facebook ads are the right fit for you, check out our guide on do Facebook ads work for small businesses?

What is a Good ROAS for Facebook Ads (Meta Ads)?

Here's something that confuses many marketers: there is no universal "good" ROAS that applies to every business. What's considered excellent for one company might be a disaster for another.

Let's explore why through some real-world examples:

High-Margin vs. Low-Margin Products

High-margin luxury brand

Imagine you sell premium watches with a 70% profit margin. You can afford to spend more on acquisition because you make more profit on each sale. A 2x ROAS might be perfectly sustainable here.

Low-margin electronics retailer

If you're selling electronics with only a 15% margin, a 2x ROAS would actually mean you're losing money on every sale! You'd need a much higher ROAS to remain profitable.

Business Models Matter

Subscription services

If you're selling a monthly subscription, a seemingly low initial ROAS might be fantastic if customers stick around. A 1.5x ROAS on the first purchase could turn into a 10x ROAS over the customer lifetime.

One-time purchase products

For businesses selling items rarely purchased again (mattresses or wedding dresses), you need a higher immediate ROAS since you won't get repeat revenue.

Operating Costs Affect Acceptable ROAS

Digital products (e-books, courses)

With virtually zero production costs after creation, you might be profitable with a lower ROAS.

Physical products with shipping

Higher fulfillment costs mean you need a higher ROAS to cover your expenses beyond just ad spend.

ROAS Across Different Business Types

Let's get more specific about what different businesses might consider a "good" ROAS to scale profitably! 

E-commerce

• Low-ticket items ($20-50): Generally need 3-5x ROAS
• Mid-ticket items ($50-200): Might aim for 3-4x ROAS
• High-ticket items ($200+): Could be profitable at 2-3x ROAS due to higher margins

SaaS and Subscription Businesses

• Might accept 1-2x ROAS on initial acquisition if their retention rates are strong
• Typically measure "payback period" alongside ROAS (how long it takes to recoup acquisition costs)

Local Services (plumbers, dentists, etc.)

• Often see 5-10x ROAS due to high service values and good conversion rates from local targeting
• Can often afford higher customer acquisition costs due to repeat business

B2B Companies

• Might be profitable even at below 1x ROAS on initial sales, if customer lifetime value is high
• Often have longer sales cycles, requiring different measurement timeframes

How to Calculate a Target ROAS

Let's take our discussion of ROAS to the next level by showing you exactly how to calculate your target ROAS while accounting for all the real costs in your business. This is where most guides fall short – they don't factor in the complete picture of your business economics. 

The Full Cost Breakdown Approach

To determine a truly accurate target ROAS, we need to consider all these cost components:

Direct Product Costs

• Cost of goods sold (what you pay your supplier)
• Manufacturing costs (if you produce your own products)
• Packaging materials
• Product labels and inserts

Fulfillment Costs

• Shipping expenses
• Warehouse costs
• Order picking and packing labor
• Returned product handling

Transaction Costs

• Payment processing fees (typically 2-3.5%)
• Currency conversion fees for international sales

Real-World Target ROAS Calculation Examples

Let's work through some concrete examples to see how this plays out for different business types.

Example 1: E-commerce Store Selling Physical Products

Let's say you run an online store selling premium candles. 

Product Economics:

• Sale price: $35
• Cost of goods: $8
• Packaging: $2
• Shipping: $5
• Payment processing (3%): $1.05
• Return rate (5%): $2.10 (handling + lost product)

Let's calculate the true profit margin:

Revenue per unit: $35.00
Total variable costs: $18.15 ($8 + $2 + $5 + $1.05 + $2.10)
Contribution margin: $16.85
Profit margin: 48.1% ($16.85 ÷ $35.00)

The contribution margin of $16.85 represents the amount of revenue that remains after covering all variable costs directly associated with producing and selling each candle. This is the amount that each unit "contributes" toward covering your fixed overhead expenses and generating profit.

Now we can calculate the break-even ROAS:

Break-even ROAS = 100% ÷ profit margin

Break-even ROAS = 100% ÷ 48.1% = 2.08x

Let's break down this calculation in more detail.

1. We start with the profit margin percentage (48.1%) which tells us what portion of the revenue we get to keep after all variable costs.
2. Dividing 100% by this percentage (100% ÷ 48.1%) gives us our break-even multiplier of 2.08. This is because if we're keeping 48.1 cents of every dollar in revenue as profit, we need to generate $2.08 in revenue to make $1 in profit (which would cover our $1 in ad spend).
3. At exactly 2.08x ROAS, every dollar spent on advertising generates enough profit to cover that dollar spent – that's the definition of "break-even."

For a sustainable business, you likely want at least a 20% profit buffer on your ad spend, which gives us:

Target ROAS = 2.08 × 1.2 = 2.5x

This 20% buffer means that for every $1 you spend on ads, you want to generate $1.20 in profit (rather than just $1 which would be break-even). To generate $1.20 in profit at a 48.1% margin, you need $2.5 in revenue ($1.20 ÷ 0.481 = $2.5).

So your target ROAS should be approximately 2.5x for this product line.

Example 2: Subscription Service with Recurring Revenue

Now let's look at a completely different business model – a subscription box service:

Product Economics:

• Monthly subscription: $24.99
• Product cost per box: $10
• Packaging and shipping: $4
• Payment processing (2.5%): $0.62
• Customer service cost per customer: $1

Business Operations:

• Average customer lifetime: 8 months
• Churn rate: 12.5% monthly
• Acquisition costs beyond ads: $5 per customer (signup incentives)

Let's calculate the single-month and lifetime values:

Monthly revenue: $24.99

Monthly variable costs: $15.62 ($10 + $4 + $0.62 + $1)

Monthly contribution margin: $9.37

Monthly profit margin: 37.5% ($9.37 ÷ $24.99)  

Customer lifetime value: $74.96 ($9.37 × 8 months)

The Customer Lifetime Value (CLV) of $74.96 represents the total profit you can expect to generate from an average customer throughout their entire relationship with your subscription business. In this example, it's calculated by multiplying the monthly contribution margin ($9.37) by the average customer lifespan (8 months). This metric is crucial for subscription businesses because it shifts your perspective from focusing on immediate returns to understanding the long-term value of your customer relationships. A solid CLV calculation helps you make more strategic decisions about how much you can afford to spend on customer acquisition – even if you're initially losing money on each new subscriber, the ongoing revenue over their lifetime can more than make up for that upfront investment. This is why subscription businesses can often accept seemingly poor first-month ROAS figures (like 0.5x in our example) while still maintaining healthy profitability over time. 

For single-month ROAS calculation:

Again, the calculation follows the same principle: if your profit margin is 37.5%, you need to generate $2.67 in revenue to make $1 in profit (which covers your $1 ad spend).

But for subscription businesses, the lifetime ROAS is more relevant. Let's dig deeper into this calculation:

This means you can spend up to $74.96 acquiring a customer and still break even over their lifetime.

Your lifetime break-even ROAS would be:

However, considering the time value of money (you're spending acquisition costs upfront but receiving revenue over 8 months), you might aim for a 1.5× buffer:

This means you want to generate $4 in lifetime revenue for every $1 spent on acquisition. But here's where it gets interesting – what does this mean for your first-month metrics?

That's 0.5x ROAS in the first month – meaning you're initially losing money on each new customer. But this is completely acceptable because over their 8-month lifetime, each customer will generate enough revenue to provide your target return.

This calculation illustrates why subscription businesses often focus on different metrics like Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) rather than immediate ROAS.

Example 3: B2B Software as a Service (SaaS)

For a B2B SaaS company, the economics look completely different:

Product Economics:

• Monthly subscription: $99 per user
• Average users per account: 5
• Monthly revenue per account: $495
• Direct costs (servers, support): $45
• Payment processing (2%): $9.90

Business Operations:

• Average customer lifetime: 24 months
• Sales team commission: $200 per new account
• Implementation costs: $300 per new account

Let's walk through the detailed calculations:

The first-month economics show a loss because of the high upfront acquisition costs:

But over the customer's lifetime, the picture changes dramatically:

Now we can calculate the break-even lifetime ROAS:

This means you need to generate just $1.18 in lifetime revenue for every $1 spent on acquisition to break even. This extremely favorable ratio is why SaaS companies can spend so aggressively on customer acquisition.

If we translate this to an acceptable first-month ROAS:

That's just 0.049x ROAS in the first month – meaning you're generating less than 5 cents in immediate revenue for each dollar spent on acquisition. Yet this can still be profitable due to the exceptionally high lifetime value of B2B SaaS customers.

This extreme case demonstrates why B2B SaaS companies often use metrics like months to recover CAC (Customer Acquisition Cost) instead of ROAS. In this example, the company recovers its acquisition costs in just over one month of service ($500 ÷ $440.10 = 1.14 months).

If you’re looking to cut out the middleman and manage your Instagram ads on your own, our article on firing your Instagram agency provides a step-by-step approach to taking control of your campaigns.

The Critical Importance of Accurate Cost Attribution

Did you notice how dramatically different the target ROAS calculations were across these business models? This is why generic ROAS benchmarks are so misleading.

A few key insights from our examples:

• The e-commerce store needs a 2.5x ROAS to be profitable
• The subscription box can accept a first-month ROAS of 0.5x
• The B2B SaaS company can accept an extremely low initial ROAS of 0.049x

These differences aren't just minor variations—they represent completely different approaches to profitability and growth.

Adjusting Your Target ROAS for Business Goals

Once you've calculated your break-even ROAS, you need to adjust it based on your current business objectives:

For Cash Flow Prioritization

Add a 30-50% buffer to your break-even ROAS to ensure strong cash flow.

For Aggressive Growth

You might accept ROAS closer to break-even or even temporarily below break-even if:

• You have investor funding
• You're building market share
• Your LTV:CAC ratio is very strong (greater than 3:1)

For Stable Business Operations

A 20-30% buffer above break-even typically provides a healthy balance between growth and profitability.

Conclusion: Your Perfect ROAS Target is Unique to Your Business

As you can see from our detailed calculations, determining your target ROAS requires a thorough understanding of your business economics. There's simply no shortcut or industry standard that applies universally.

The most successful Meta advertisers:

1. Calculate their true break-even ROAS using their core business costs
2. Adjust their target based on current business priorities
3. Regularly revisit these calculations as costs and business goals evolve

By taking this comprehensive approach to ROAS, you'll make much more informed decisions about your Meta ad campaigns and avoid the common pitfall of comparing your performance to irrelevant benchmarks from businesses with completely different economics.

Remember: The goal isn't to achieve the highest ROAS possible—it's to achieve a ROAS that drives sustainable growth and profitability for your unique business model.