ROAS vs. profitability: what most beauty brands miss

ROAS (Return on Ad Spend) is the metric everyone talks about. "We hit 5× ROAS last month" sounds like a win. Sometimes it is. Often, it's not the full story.

The ROAS trap

Here's a simplified example. You're a skincare brand: - Product cost: R200 - Selling price: R500 - Gross margin: 60% (R300)

If you achieve 3× ROAS on R10,000 ad spend, you've generated R30,000 revenue. But: - COGS: R12,000 - Ad spend: R10,000 - Gross profit from ads: R8,000

That's an 80% return on ad spend in gross profit terms. Sounds good.

Now add fulfilment, packaging, agency fees, returns, and your actual CAC picture looks different.

What to measure instead

The metric you actually want is contribution margin per order — revenue minus variable costs (COGS, fulfilment, payment fees, returns, ad spend). If that number is positive and growing, you're building something sustainable.

ROAS is a *signal*, not a target. A 3× ROAS on a high-margin product might be more profitable than a 6× ROAS on a low-margin one.

The 3 questions to ask

1. What is my contribution margin per first order? Is it profitable on acquisition? 2. What is my customer LTV at 90 and 180 days? Can I afford to acquire at break-even if customers come back? 3. What ROAS do I need to hit my target blended CAC? Work backwards from this.

When you answer these questions, your ROAS targets become grounded in business reality — not just ad account performance.

This is the kind of thinking we bring to every account. Numbers are only useful if they're telling you what to do next.