Your ROAS looks good. Is your business making money?

ROAS can be a vanity metric. It looks convincing in a monthly report: spend €1, make €5. A neat result, easy to celebrate.

Meanwhile, the business can still be losing money.

When reported conversion value is revenue, return on ad spend tells you how much revenue a platform attributes to your advertising relative to its cost. It says little about what those orders cost to fulfil, whether customers would have bought anyway, or what remains after the business pays its bills.

It’s useful for managing campaigns. It becomes misleading when it’s treated as proof of profitability.

Who gets the credit?

A customer discovers your collection on Instagram, receives an email and searches your brand name before purchasing. Several channels may have contributed. More than one platform may claim the sale.

Brand search campaigns often report particularly strong ROAS because they reach people already looking for you. There can be good reasons to run them, but capturing existing demand is different from creating it. Grouping brand search with acquisition campaigns can make performance look healthier than new customer growth suggests.

Meta can also attribute purchases to people who saw an ad without clicking. Some may have been influenced by it. Others might have purchased after an email, a recommendation or simply because they already love the brand.

An attributed purchase doesn’t establish that the advertising caused it. The useful question is how many additional orders your investment generated.

Start with the whole business

MER, or marketing efficiency ratio, gives you a broader view. Here, I calculate it as total net revenue divided by total paid media spend over the same period.

If your business generates €50,000 in net revenue and spends €10,000 on advertising, your MER is 5.

Each order is counted once, rather than accepting the revenue claimed by individual platforms. You can see how advertising spend sits against actual business revenue.

But MER needs context too. A loyal customer base can support a strong ratio while new customer acquisition slows. A collection launch, seasonal peak or wholesale order can change the picture. Keep the revenue scope consistent, and look at new and returning customers separately.

MER is a better starting point for the commercial conversation. It still needs the P&L beside it.

What does an order leave behind?

Before deciding what you can afford to spend on a customer, understand what their order contributes.

Start with sales after discounts and expected returns, excluding VAT. Deduct the product cost, payment fees, fulfilment, packaging, shipping subsidies and other variable costs. What remains is your contribution before advertising.

Consider an illustrative €100 order, excluding VAT:

ItemAmountNet sales after discounts and returns€100Product cost−€30Other variable order costs−€15Contribution before advertising€55Customer acquisition cost−€25Contribution after advertising€30

That €30 still needs to help cover salaries, rent, software, creative production and other overheads before becoming profit.

If acquisition costs rise to €45, the same order leaves €10. Sales might be growing. The amount available to run the business is shrinking.

Different products leave different contributions. A bestselling dress with frequent returns can be less valuable than its revenue suggests. A discounted product may sell quickly while leaving little room for advertising.

Your acquisition targets should reflect those differences.

Scaling changes the economics

The customers reached at a modest budget aren’t necessarily representative of those reached at a much larger one. As spend increases, acquisition costs can rise and returns can diminish.

That doesn’t automatically mean scaling is wrong. A lower contribution percentage across more orders can still produce more contribution in euros.

What matters is the return on the next increase in spend.

If another €5,000 in advertising produces €12,000 in additional net sales, and those sales carry a 50% contribution margin before advertising, you have €6,000 available. After the extra media spend, €1,000 remains before any additional overhead.

That is a much tighter proposition than €12,000 in extra revenue might suggest. Small changes in returns, discounts or fulfilment costs could absorb the gain.

The account’s average ROAS can conceal this. Assess what the extra investment adds, and whether the business can support it.

Profit and cash flow have different calendars

A collection is often paid for long before it sells. Deposits, production balances and freight can leave the bank account months before the first customer order arrives.

A profitable month on paper can still leave you short of cash for the next buy.

Advertising therefore needs to stay close to inventory planning. Which products have enough stock to support more spend? Which sizes are selling out? Which pieces are tying up cash? What will it take to sell through the collection without giving away the margin?

A strong campaign selling the last few units of a bestseller won’t necessarily solve a wider stock problem. Equally, selling slower inventory at a lower margin may be a considered cash-flow decision.

Those choices need to be visible in the plan.

A report worth reading

I want to see platform ROAS alongside MER, new customer acquisition costs, contribution after advertising, the P&L and inventory sell-through.

Together, they help explain whether growth is adding profit, consuming cash or relying on customers who were already coming back.

A good advertising report should leave you better equipped to decide what to buy, what to spend and how far to grow.

The most impressive number in the ad account may never be the most useful one.