ROAS vs. Revenue: Why You Need Both to Scale Your Business
Picture this: You've got celebrities promoting your product. Your social media is buzzing. Everything looks great on paper. But here's the uncomfortable truth—if you're not backing it up with strategic marketing dollars and a solid plan, none of it matters.
This scenario isn't hypothetical. It's playing out in businesses every single day. Companies celebrate vanity metrics while wondering why their growth has stalled. The real question isn't whether your marketing looks good—it's whether it's actually moving the needle.
The Two-Part Equation for Growth
Most businesses get stuck asking the wrong question. They ask: "How much should we be spending on marketing?"
The better question? "What ROAS do we need to achieve so we can confidently spend more?"
Here's the reality: You need two things working in tandem to drive meaningful business growth:
Healthy ROAS (Return on Ad Spend) that makes your marketing sustainable
Sufficient total budget to actually impact your bottom line
Think of it like working out. You can have perfect form on your bench press (great ROAS), but if you're only lifting 10 pounds (tiny budget), you're not going to see results. Conversely, throwing massive weight around with terrible form (high spend, poor ROAS) is just going to hurt you.
You need both the right technique and the right scale.
The ROAS Reality Check: Start with Education, Not Expectations
If you're just getting started with paid advertising, here's what you need to hear: You're going to lose money at first.
Not because you're doing it wrong, but because you're doing it right.
The first three to six months of any advertising effort should be viewed as your education period. This is when you're:
A/B testing messaging to see what resonates
Identifying which audience segments convert
Optimizing landing pages for different campaigns
Testing various calls to action
Learning which channels drive quality leads
This isn't wasted money—it's tuition. You're paying to learn what works for your specific business, your specific audience, and your specific offer.
The Break-Even Milestone
Your first real goal shouldn't be achieving a 5X or 6X return. It should be reaching break-even.
What does break-even look like for you? That depends on your margins, but typically you'll see it around 2-3X ROAS. Once you hit that point, you're no longer bleeding cash. You've proven the model works.
From there, you can methodically improve toward 4-5X returns. But break-even is your first finish line, not some arbitrary high ROAS number that might not even be realistic for your industry.
The Budget Paradox: Why Small Spending Keeps You Small
Let's do some quick math.
If you're a $20 million company spending $20,000 per month on advertising, that's $240,000 annually. Sounds like a lot, right? But it's only 1.2% of your gross revenue.
Even if you achieve a stellar 5X ROAS on that spend, you're generating $100,000 in monthly revenue from advertising, or $1.2 million annually. For a $20 million company, that's a 6% lift. Nice, but not transformational.
The uncomfortable truth: If your ad budget represents less than 2% of your revenue, you're probably not going to move the needle significantly, no matter how good your ROAS is.
Industry wisdom suggests allocating somewhere between 10-20% of gross revenue to marketing, depending on your business model and margins. That's not a number you hit overnight, but it's where you need to build toward if you want meaningful growth.
The Strategic Path to Scale
So how do you get from conservative spending to business-changing budget allocation? Here's the framework:
Phase 1: Prove the Model (Months 0-6)
Start with a reasonable test budget. Expect to learn, not earn. Focus entirely on education and optimization. Track everything meticulously.
Phase 2: Hit Break-Even (Months 6-12)
Use your learnings to dial in your targeting, messaging, and conversion path. Your goal is to stop losing money and prove sustainability.
Phase 3: Build Your Case (Months 12-18)
Now you have data. You know what levers to pull. Create a concrete plan showing how you'll improve ROAS from where you are to where you need to be (typically 4-5X). Present this to leadership with actual performance history.
Phase 4: Scale with Confidence (Months 18+)
With proven performance and a clear plan, request budget increases. Start moving from 2-3% of revenue toward that 10-20% range. This is where the compounding effect kicks in.
Real World Success: The Long Game Pays Off
The most exciting growth stories don't happen in 90 days. They happen over 12-18 months of disciplined execution.
One example: Starting with just $5,000 per month in ad spend, a business methodically identified their ideal ROAS, plugged the leaks in their conversion funnel, and earned trust through consistent performance. Within 18 months, they scaled to over $100,000 in monthly ad spend—all while maintaining healthy returns.
That's a 20X increase in budget. But it didn't come from wishful thinking or blank checks. It came from:
Establishing break-even ROAS first
Proving the model works at small scale
Building a data-driven plan for improvement
Earning trust through consistent delivery
Scaling methodically based on performance
Think of Coca-Cola. They didn't become a household name overnight. They aggressively invested in marketing, compounded their efforts over time, and built one of the most recognized brands on earth.
Don't be Pepsi. Be patient, be strategic, and be committed to the long game.
The Two Fatal Mistakes
As you think about your own marketing strategy, watch out for these common pitfalls:
Mistake #1: Budget Without Performance "I have this budget allocated, so let's just spend it." This is how you burn cash without learning anything. Budget without a performance framework is just expensive guesswork.
Mistake #2: Performance Without Scale "We're getting 6X ROAS! Let's keep it right there and grow 2% per month." Great efficiency means nothing if your total impact is negligible. Perfect returns on tiny budgets don't transform businesses.
The solution? You need both working together. Healthy ROAS that proves your model works, plus sufficient budget to make a material difference in your bottom line.
Your Next Steps
If any of this resonates with you—if you're stuck in one of these traps or simply trying to figure out how to scale strategically—it's time to get real about where you are and where you need to go.
The path from where you are now to meaningful growth isn't a mystery. It's a process. It requires:
Honest assessment of your current performance
Realistic expectations about timelines
Methodical testing and optimization
Data-driven decision making
Patience to see it through
It takes time. It takes work. But it's how you actually grow a business, not just generate activity that looks like growth.
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This article is based on insights from the Click and Mortar podcast hosted by Mike Patterson and Dustin Trout, digital marketing experts focused on helping businesses maximize their advertising ROI.
