Two product groups can report exactly the same ROAS and contribute completely different amounts of cash. This worksheet shows how to work that out for your own groups, line by line, using figures you already hold.
1. Definitions used here
Net revenue
Revenue after discounts, after returns and refunds, and excluding VAT and delivery income collected on behalf of a carrier. Every figure in this worksheet is stated on this basis.
COGS
Landed cost of the goods actually kept by the customer: unit cost, inbound freight and duty.
Other variable cost
Costs that move with each retained order: payment fees, pick, pack and outbound delivery, and the handling cost of processing returns.
Pre-ad contribution
Net revenue − COGS − other variable cost. What is left before any advertising cost.
Break-even ROAS
1 ÷ pre-ad contribution margin. The ROAS on net revenue at which advertising exactly covers the contribution it generates.
Post-ad contribution
Pre-ad contribution − ad spend. Before overheads, salaries, agency fees, software, tax and any fixed cost. It is not net profit.
Avoid double counting returns. Deduct returns once, on the revenue line, so that net revenue reflects only orders the customer kept. Then apply COGS and other variable costs to those retained orders only. Do not deduct a return rate from revenue and then apply a second returns allowance in the cost lines, and do not carry the COGS of returned goods that came back into saleable stock. Keep the restocking or disposal cost of returns in "other variable cost".
2. Worked example
Two hypothetical product groups, A and B. Both are given identical net revenue and identical ad spend, so both report the same 5× ROAS. The figures are illustrative and chosen to be easy to follow; they are not client data and not a benchmark.
Table 1 — Same ROAS, different economics (per group, one period)
Line
Group A
Group B
Net revenue
£1,000
£1,000
Ad spend
£200
£200
Reported ROAS
5.00×
5.00×
COGS
£400
£650
Other variable cost
£150
£150
Pre-ad contribution
£450
£200
Pre-ad contribution margin
45%
20%
Break-even ROAS (1 ÷ margin)
2.22×
5.00×
Post-ad contribution
£250
£0
Both groups report 5×. Group A is running at more than double its break-even and returns £250. Group B is sitting exactly on its break-even and returns nothing. A single blended ROAS target across both would have shown one healthy number and hidden this entirely.
Sensitivity scenario: what a different split would have produced
Hold the total ad spend at £400 and ask what the same period would have looked like under a different split, holding efficiency at 5× and both margin structures unchanged.
Table 2 — Same £400 total spend, two hypothetical splits
Split
Ad spend A
Ad spend B
Post-ad A
Post-ad B
Total
Equal (as observed)
£200
£200
£250
£0
£250
Weighted to A
£300
£100
£375
£0
£375
Under the weighted split, Group A takes £300 of spend at an unchanged 5×, so net revenue of £1,500 and pre-ad contribution of £675 at 45%, leaving £375 after ad cost. Group B takes £100, so £500 net revenue and £100 pre-ad contribution at 20%, leaving nothing. Same total spend, same reported blended ROAS, £125 more contribution.
This is a sensitivity scenario, not a prediction. It shows what the arithmetic implies if efficiency and margins hold. In a live auction they usually do not. Additional spend on one group meets diminishing marginal returns, finite demand and finite auction headroom; incremental clicks are typically more expensive than average clicks; the mix of products, devices and audiences inside a group changes as budget changes; and moving spend can affect the group you moved it from. None of that is proven by this table. The £375 is conditional arithmetic, not a ceiling or a bound: real efficiency can improve as well as deteriorate. Test any real reallocation against measured outcomes.
3. Blank template
One column per product group. Use a single trading period, the same period for every column, and state every figure on the net revenue basis defined in section 1.
Table 3 — Your product groups. Period covered: ______________________
Line
Group 1
Group 2
Group 3
Group 4
Group name
a. Net revenue
b. Ad spend
c. Reported ROAS (a ÷ b)
d. COGS
e. Other variable cost
f. Pre-ad contribution (a − d − e)
g. Contribution margin (f ÷ a)
h. Break-even ROAS (1 ÷ g)
i. Headroom (c − h)
j. Post-ad contribution (f − b)
How to read your own completed sheet
Line i below zero: the group is losing contribution on every order advertising generates.
Line i close to zero: the group is working for nothing and is exposed to any CPC increase.
Line i comfortably positive: the group has headroom, which is where a reallocation test belongs.
Compare line j across groups, not line c. Two groups on the same ROAS can sit anywhere on line j.
4. Limitations of this worksheet
Post-ad contribution is before overheads, salaries, agency fees, software, tax and fixed costs. It is not net profit and should not be presented as profit.
It is a single-period, last-click-shaped view. It carries no view on incrementality, on new versus returning customers, or on lifetime value.
It assumes your platform-reported conversions and revenue are accurate. If conversion tracking is double counting, every figure downstream is wrong. Check the tracking before trusting the sheet.
Margins are treated as fixed within a group. Real groups contain a spread of margins, and a group average can conceal loss-making lines inside a profitable group.
The reallocation table is arithmetic under held assumptions. It is not a forecast and no claim is made that a real account would reproduce it.
Group A and Group B are hypothetical illustrations. They are not client data, not an average, and not a benchmark of any kind.