Profit on ad spend: the five-minute self-test
A short, honest self-test for any ecommerce leader who suspects their ad budget is earning less than it looks like it is. No tools, no consultants.
Sophia Båge · Cut Waste
Profit on ad spend, POAS, sounds like a metrics project. It does not have to be. You can get a directionally honest read in five minutes with a calculator and last month's numbers.
The five-minute test
- Take last month's total ad spend across all channels.
- Take the revenue your platforms claim it generated.
- Multiply that revenue by your average gross margin, after returns, discounts, and shipping.
- Divide that adjusted profit by the ad spend. That is your rough POAS.
How to read the number
- Below 1.0: your advertising is losing money before you have paid a single overhead krona.
- 1.0–1.5: you are buying revenue at cost. Common in discount-heavy categories.
- 1.5–2.5: healthy, but probably masking a wide spread between best and worst SKUs.
- Above 2.5: good. Now ask which products and channels are pulling the average up.
The point of the test is not the number. It is the conversation it starts.
What to do with the answer
If the number surprised you, the next step is not a new dashboard. It is a Cut Waste review: a structured, two-week read on which products, audiences, and channels are quietly dragging the average down, and what you would free up by stopping.
About the author
Sophia Båge
Co-Founder, Untangle Collective
Sophia Båge is Co-Founder of Untangle Collective. She works with ecommerce leaders to reconnect performance marketing with profitable growth. Identifying where revenue and margin become disconnected, and what should scale instead.
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