Spending $1 to make $2 is great. Spending $1 to make $0.80 is a slow death for your business. The problem is, most marketers track "Revenue" but forget about "Profit."
ROI (Return on Investment) is the only metric your boss—or your bank account—cares about. Let's strip away the fancy accounting terms.
The Simple ROI Formula
ROI = (Net Profit / Cost of Investment) x 100
If you spent $1,000 on ads and sold $5,000 worth of product, did you make a 400% ROI? No. You forgot the cost of goods!
The Trap:
Sales - Ad Spend ≠ Profit.
Sales - (Ad Spend + Product Cost + Labor + Shipping) = Profit.
Why 300% is the Magic Number
In digital marketing, a 300% ROAS (Return on Ad Spend) is usually the breakeven point once you factor in overhead. If you are seeing 200%, you might actually be losing money.
Check Profitability
Don't Guess
Before you launch that Facebook ad, run the numbers. Know your breakeven. It stops you from burning cash.