How to Calculate the ROAS of Your Home Service Business

How well do you know your business numbers? Are they just marks on a spreadsheet or have you ever really dug deep into the 0s and 1s that make up how you make money?

You absolutely should, and that dive starts with ROAS--Return On Ad Spend. Understanding and optimizing your ROAS makes a big deal, as this is the thing that helps you maximize those Google Ads dollars, no matter your business size.

In simple terms, it helps you make your marketing dollars work for you. Luckily, ​Service Scalers has our own ROAS calculator​.

Whether you're a seasoned entrepreneur or just starting, understanding your business numbers is one of the most important ways to figure out your growth--and how much it will cost.

Let's take a look and break it all down.

How to Calculate Return on Ad Spend (ROAS)

Here's a step-by-step guide to calculating ROAS for your home service business:

1. Monthly Ad Spend: Determine your total monthly advertising expenditure. For example, if your annual revenue is $1 million, you should aim to spend around 10 percent on marketing, which translates to about $8,000 per month.
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2. Cost Per Click (CPC): This varies by industry and location. Let's assume a CPC of $4.
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3. Website Conversion Rate: This is the percentage of visitors who convert into leads. A good benchmark is 8-10%. For this example, let's use 10 percent.
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4. Average Sale Price: This can vary. Let's use an average sale price of $5,000.
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5. Lead to Customer Rate: This is the percentage of leads that convert into customers. Aim for 40%.

Here's a simple example using these numbers:

• Monthly Ad Spend: $8,000
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• Expected Clicks: $8,000 / $4 CPC = 2,000 clicks
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• Leads Generated: 2,000 clicks * 10% conversion rate = 200 leads
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• Cost Per Lead: $8,000 / 200 leads = $40 per lead
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• Customers Acquired: 200 leads * 40% lead-to-customer rate = 80 customers
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• Revenue Generated: 80 customers * $5,000 average sale price = $400,000
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• ROAS: $400,000 revenue / $8,000 ad spend = 50

A ROAS of 50 means that for every $1 spent on advertising, you generate $50 in revenue. By knowing and optimizing these numbers you can make informed decisions to grow your business.

Why is ROAS Important?

Knowing your ROAS is big because:

1. It helps you determine how much you should spend on marketing to achieve your goals.
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2. You can measure the effectiveness of your advertising campaigns and make decisions.
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3. By optimizing your ROAS, you can scale your business sustainably.

Getting your ROAS will also help you figure out if you need to save money and find alternate methods for lead generation. Is your cost-per-click too high? Average sale price too low?

Now you know that you need to go with an organic approach or find a different drive. It puts you on the right path. Numbers are handy like that. Ways you can optimize that include reducing your CPC cost and aiming that number lower.

Enhancing your site for a better conversion rate should also take priority. It's that easy. Understand your ROAS, understand your ability to grow.

Sam Preston, CEO of Service Scalers
www.servicescalers.com

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