The Perfect ROAS Formula for Managing Your Ad Spend
Managing social media ads is tricky. How do you know what's working? How can you be sure? When things are working, how do you know when it's time to change creative? How do you spend more on facebook or instagram ads effectively, without wasting spend and while getting the same if not better ROAS?
I will break answer these questions and more. I'll even let you buy the very same template I used to generate $97,856 in sales in one month for a direct-to-consumer brand selling on Shopify. This is the same template I developed when I was CMO of Factor Meals, where I was spending over $3,000 per day on Facebook, buying ads on Facebook and Instagram.
What is ROAS, anyway?
If you've been searching for a ROAS template, you have some idea of what ROAS stands for. Return on Ad Spend is simply, the money you make divided by the money you spend on ads. As your marketing operation expands, you should have a ROAS for each marketing channel that you're spending in, then a blended ROAS that calculates your return on ad spend across all channels.
A common means of getting customers when you're starting out is to use paid social media ads on Facebook and Instagram, then expand to Google Search Ads, Google Merchant, YouTube, Tik Tok, Pinterest and others.
ROAS by channel is: Attributed sales by channel / spend in that channel.
If Google analytics is showing me I made $1,500 in sales from Facebook ads, and I spent $1,000 on Facebook ads:
$1,500 / $1,000 = 1.5.
You have a ROAS of 1.5
Over what period of time should I calculate ROAS?
Good question. Running ads and getting a good ROAS is a lot like surfing. When you launch a campaign, you're paddling out to sea. Things will go slow at first. (It's also dependent on how much you're spending to start.) Then, as your pixel gets a chance to send data back to the algorithm, performance starts to pick up a bit. This is akin to catching a wave.
The performance will be awesome for a while. You're going to feel like Tony Montana sitting in his hot tub. "The world is yours!" You might think.
But eventually even the best social ads campaigns peters out. That's just the way it is. This is when you've come back to shore.
You'll want to a new campaign to get things popping again.
Because your ROAS can take a turn for the worse over the course of a few weeks, or a few days, depending on the size of your budget, you'll want to track your ROAS by:
- Last 7 Day Average
- Last 14 Day Average
- Last 30 day Average
You can even add a Last 3 Day average, but we generally do not advise making decisions on your ads performance over less than a 7 day period, due to the attribution windows that transmit data.
Why use a proven ROAS Formula template to scale your Facebook ads?
If you've ever managed Facebook ads for conversions, where you're trying to get a specific outcome like leads or sales, you might know that, your campaign starts out slowly. Then as the algorithm starts working, results improve. Eventually, like a surfer coming ashore, your campaign loses steam and craps out. If you've been spending $25/day, this may have occured over a few weeks.
But you start to scale paid media spend, from $100, up to $500, then $1,000 and up things can go haywire, quickly. There are significant ramifications if something isn't working well. Wasting dollars is extremely painful, and the pain may be magnified 10 fold if you've gone from $100 to $1,000 in a 3 month period.
I've developed this template from personal experience managing paid social media spend for Factor Meals (CMO) and for The Axle Workout (CRO). In both cases, I was managing spend upwards of $3,000 per day. When you're burning cash at this rate, you generally can't afford to wait until the end of the month to assess progress.
In this template, I'll share Google Sheet templates for:
The importance of a coherent weekly summary
Keeping an up-to-date experiment log
Details of a Daily Spend Checkin Doc
Tracking results weekly and monthly
I built this template from scratch, because any time I was evaluating results in the moment, I always want to know a few things, like:
How do results over the past 7 days compare to the past 14, and 30 days?
How am I doing compared to 30 days ago?
What are my 7-day and 30-day moving averages?
In my experience working with 20+ growth-minded startups in the last 10 years, there are no done-for-you dashboards that compile the information you need in one place, to truly OWN your numbers. These dashboards require a daily, 15-30 minute session to update.
The result? Full grasp of your cash burn at the hands of your media spend.