Once you have all of your costs tracked, or even if you don’t have all costs tracked yet, you are now able to calculate a more accurate ROAS bid based on your true margins.
ROAS bid calculation
- Decide how much profit you want to makeAs a percentage of the selling price (without VAT), e.g. 10%.
- Get your selling priceWithout VAT, to match what your conversion tracking reports.
- Get your costsYour profit per sale after returns, from the margin calculation.
- Calculate your max ad cost per saleProfit per sale after returns, minus your profit target.
- Calculate your ROAS bidSelling price divided by your max ad cost per sale.
Example: the same product, with a 10% profit target
Selling price without VAT£50.00
Profit per sale after returns£21.38
Profit target (10% of £50.00)−£5.00
Max ad cost per sale£16.38
ROAS bid (£50.00 ÷ £16.38)3.05
Breakeven ROAS
2.34ROAS bid for 10% profit
3.05In Google Ads, target ROAS is entered as a percentage, so a ROAS bid of 3.05 is a target ROAS of 305%.
Do this for every product and every product gets its own precise bid. A product with a thin margin gets a higher ROAS target, so you stop overpaying for it. A product with a healthy margin gets a lower one, so it can win more of the sales it can afford.