How the planning target is calculated
First subtract the profit margin you want to retain from the contribution margin before advertising. That leaves the maximum ad-spend share of revenue. Divide 1 by that share to find the minimum ROAS. With a 40% pre-ad contribution margin and a 10% retained-margin goal, 30% of revenue is available for ads, so the planning floor is about 3.33×, or 333.33%.
Use the right margin
The contribution margin should account for variable costs such as product, fulfillment, payment fees, and expected returns, but not the ad spend being solved for. The retained margin is a goal measured as a share of attributed revenue, not a promise of overall company net profit. If fixed costs or repeat purchases matter, model them separately.
Google Ads Target ROAS is a bidding goal
Google says its Target ROAS bidding tries to achieve an average conversion value per cost equal to the setting. Individual conversions can be above or below it. Before choosing an in-platform target, review historical performance, conversion-value tracking, conversion delay, and whether the value reported to Google represents revenue or another metric. This calculator does not inspect your ad account.