81: Stop obsessing about ROAS🙃

Why 10X ROAS Is Misleading (and What to Ask Instead)

• I explain that seeing people brag about “10X ROAS” on Instagram or LinkedIn doesn’t tell the full story, because ROAS (return on ad spend) is just a ratio of revenue divided by ad spend and can’t be judged without context. 
• I walk through the math: if you sell a $37 digital product and it costs around $45 to acquire a customer, spending $5,000 on ads could generate about 111 sales and only about $4,100 in revenue (0.82X ROAS), making 10X ROAS unrealistic or even mathematically impossible at those costs. 
• I contrast this with a $5,000 offer where a 2X ROAS on $5,000 in ad spend yields $10,000 in revenue, showing why ROAS alone is misleading. I recommend asking what you’re selling and what it will realistically cost to sell it, 

00:00 ROAS Hype Trap
01:13 What ROAS Means
01:44 Why 10X Misleads
02:28 Low Ticket Math
04:13 High Ticket Reality
05:11 Better Questions to Ask
05:42 Next Episode Teaser

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[00:00:00] So you're scrolling through Instagram or LinkedIn, and someone is sharing their campaign results on their ads. Here's what it says, "Just hit 10X ROAS." And you think, "Okay, yeah, that's what I want. That's what I'm going to ask for when I hire someone." And so you get on a call with myself or an agency or another ads person

you're ready for that 10X ROAS. But here's what you need to know. That number doesn't really tell you anything without the whole story.

And honestly, it drives me crazy because I have been on multiple calls where one of the first questions that I get asked is, "So what's the best ROAS you've ever gotten?" And I'm just thinking, "Okay, I understand there's a lot of hype about ROAS," and yes, when in, in the world of ads, that's typically a good thing, [00:01:00] right?

You wanna have at least, one and a half, 2X ROAS, but 10X seems to be the number that's floated around there a lot. So here's what it really means. , Here's the number, what it is. ROAS stands for return on ad spend. It's just a ratio. You divide the revenue that you brought in by the money you spent on your ads.

So let's say you spend $1,000 on ads and made $5,000 in revenue. That's a 5X ROAS. You got $5 back for every dollar you spent. Outstanding, right? Pretty simple. So far so good. So now let's look at what actually happens out there. You see someone bragging, "10X ROAS on my digital product," and you think, "Oh my gosh.

All right, let's, let's find out how to do this." So [00:02:00] you get on the call, and you say, " Okay, so what's the biggest ROAS you can get for me? Can you get me 10X ROAS?" And maybe I say, "Okay, well, that depends," which is always the answer. Or an agency says, "Well, we get 2X. We... You know, 2X could be really good. It just depends."

And maybe you walk away disappointed, like, "Okay, well, I need to hire someone different." Let's talk about real numbers. If you're selling a $37 product, could be a digital course

It could be amazing, but it... $37, right? An instant download, let's say, or instant access to something, and you're ready to run ads, what you might not know is the cost to actually sell this product might cost between 30 and $60. That is kind of what is typical. Let's say it's [00:03:00] 45, just to split the difference.

So now you're going to spend, and I'm not assuming that you have a $5,000 budget, but this is just so I can compare apples to apples. You, you spend $5,000 on ads, and you want that 10X ROAS, right? That's what everyone's talking about. So let's do the math. $5,000 divided by $45, which is how much, let's say, it cost to get a sale, would equal about 111 customers.

111 customers times $37 equals about $4,100. That's a ROAS of 0.82X. It didn't hit 10X. It lost money, so -

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'..

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10X

-ROAS isn't really... it's not realistic for that product at those [00:04:00] acquisition costs. It's mathematically impossible. So I say, "Well, I got 2X ROAS," or the agency says, "Well, I, I can get a 2X ROAS."

Let's say your offer that you're selling isn't $37, but it's $5,000. Let's say it's a coaching package, a program or a course or something higher, and you spend $5,000 on ads, so the same amount you spend. At a 2X ROAS, you just made $10,000 in revenue. That's not disappointing. That's $5,000 in profit on your ad spend, and you probably got a customer who's going to be with you for a while.

So when you're comparing 10X ROAS on someone's, we don't know, because maybe they're not telling you what the product was.. Which one is actually better, So the 10X ROAS is [00:05:00] misleading. It's just a ratio. It doesn't tell you how much you actually made, and it definitely doesn't tell you what's realistic for your business because, again, it depends.

So when you're planning on hiring someone, hiring me, hiring an agency, someone else, a question to ask isn't, "Can you get me 10X ROAS?" Because until you actually have a conversation about your offer, your prices, all of that, it's not the question to be asking. What you need to know is What am I selling and how much is it going to cost me to sell it

what's that realistic number? So if you want to know how to position that $37 digital product with ads to actually make money, I would never say 10X, but come back next week. That's what we're gonna talk about in the next [00:06:00] episode. I appreciate you being here.

I'll see you next time on Facebook Ads Quick Tips