LGT Digital presents the

ROAS Calculator

Note: The ROAS calculator was developed and built by LGT Digital. It’s the first of its kind as a tool for eCommerce brand owners

What this ROAS calculator helps you work out:

The minimum ROAS you will need to achieve your ROI (return-on-investment) goal. For example, if you’re looking for your “breakeven” ROAS, you’d enter a “1” in the Profit ROI section. This will produce the minimum ROAS you would need to breakeven after factoring in your agency fees, Adspend and product margin. If you would like to produce a 100% profit ($1 in, $2 in profit out), you’d put a 2.

It can help you compare the gap between working with an agency or running Ads yourself. The idea of paying a retainer can be daunting, but at times you may find the gap in ROAS needed by an agency as opposed to yourself is small (i.e. to breakeven with an agency you need a 2.1 ROAS, on your own it’s a 2.5…which means the agency you’re working with only needs to produce a 0.4 ROAS higher and they pay back their retainer).

It can help you determine a reasonable Adspend to agency fee ratio. A huge mistake Agencies and brand owners make, is not spending enough in Adspend to pay back the retainer fee. For example, if your product margin is 60%, and you’re paying an agency $3k a month, with an Adspend of only $3k the ROAS you’d need to break even is a 3.33. Whereas if your Adspend was $8k, the ROAS to breakeven drops to 2.29. The higher the Adspend ratio to your agency fee, the easier it will be to justify having them around (if they can hit those ROAS targets of course).

Disclaimers

– With the introduction of IOS 14, the accuracy of ROAS for Social Ads (Facebook, Instagram, TikTok etc.) has been significantly impacted. ROAS can still be used a measure for success, but it’s important to consider that there are purchases taking place that are not being registered.
– The Profit tabs do not factor in all of your business expenses.
– The revenue shown is purely what will be produced from the Adspend entered. It does not factor in sales that come in from other organic channels such as SEO, influencers etc.

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