A target ROAS pulled from thin air is the most expensive number in a media plan

Every quarter we sit in planning meetings where someone proposes a target ROAS based on what the brand hit last year, what a competitor reportedly hits, or what feels right. None of those are good answers. A correct target ROAS is a derived number — derived from contribution margin, payback period, and the brand's view of new-customer LTV.

Start with contribution margin

Contribution margin per order, after COGS, fulfilment, payment processing, and the variable cost of customer service, is the input nothing else can replace. If your contribution margin is forty percent, every dollar of paid spend has to recover at least 1/0.4 = 2.5x in revenue just to break even on the order — before any consideration of repeat purchase or LTV.

Decide on payback period

The next question is how long the business is willing to wait to break even on acquisition. A venture-backed brand that needs to grow can run a six-month payback. A profitable, founder-owned brand might insist on the first order paying back. Both are legitimate; what is not legitimate is leaving the question unanswered and discovering the answer in the cash flow report three months later.

Once you have a payback period, you can include the expected repeat-purchase contribution within that window in your effective margin. A brand with a fifty percent ninety-day repeat rate effectively earns more than one order's worth of margin per acquired customer, and the target ROAS on the first order can be lower without breaking the unit economics.

New-customer ROAS, not blended ROAS

Blended ROAS is the number every reporting dashboard surfaces by default, and it is the number that hides the most. A brand with strong organic and email channels will show a healthy blended ROAS while paid is quietly subsidising existing customers. We always set targets on new-customer ROAS, computed from first-party data, and we hold paid to that number.

Translate into channel and stage targets

Once you have a defensible new-customer ROAS target at the brand level, you split it by funnel stage. Top-of-funnel prospecting on Meta or YouTube will run below the brand average; bottom-of-funnel branded search will run far above it. The blended target is what falls out of the spend mix, not what is enforced on each campaign.

The conversation the target enables

The real value of doing this work is not the number itself. It is that finance, marketing, and the founder all agree on the assumptions behind it. When the account misses target in week three, the conversation is no longer "should we cut spend" — it is "which assumption is wrong: payback, margin, or LTV?". That is a much better conversation to be having, and accounts that have it consistently are the ones that scale without drama.