The Hidden Truth Behind ROAS: Why Profit-Adjusted ROAS is the Real Metric for Cleaning Businesses
When you’re running a cleaning business, understanding how well your marketing dollars are working for you is critical. One of the most popular metrics used to measure this is ROAS (Return on Ad Spend). ROAS tells you how much revenue you’re generating for every dollar spent on advertising.
But here’s the hidden truth: ROAS alone isn’t enough. If you’re only looking at revenue, you’re missing a crucial part of the equation—profit margins. Without factoring in profit, you could be spending ad dollars on services that don’t actually improve your bottom line.
In this post, we’ll dive into why profit-adjusted ROAS is the real metric that cleaning businesses should focus on and show you three powerful ways to improve it.
Why Profit Margins Matter
Not all services are created equal, and the same goes for the profitability of those services. In your cleaning business, you likely offer a range of services such as commercial cleaning, residential cleaning, deep cleaning, and carpet cleaning—each with different levels of profit margins.
- Example: A premium deep cleaning service might have a high profit margin of 60%, while basic office cleaning might only yield a 30% profit margin. If you’re spending the same amount of marketing dollars on each, you’re not getting the full picture of your marketing efficiency.
That’s where profit-adjusted ROAS comes in.
ROAS vs. Profit-Adjusted ROAS: Understanding the Difference
| Metric | Formula | Example Calculation |
|---|---|---|
| Standard ROAS | (Revenue from Ads) / (Cost of Ads) | $5,000 / $1,000 = 5 |
| Interpretation: For every $1 spent, you generate $5 in revenue. This focuses only on the revenue, not on actual profit. | ||
| Profit-Adjusted ROAS | (Revenue from Ads × Profit Margin) / (Cost of Ads) | ($5,000 × 40%) / $1,000 = 2 |
| Interpretation: For every $1 spent, you earn $2 in profit. This takes into account your profit margins, providing a clearer view of profitability. | ||
| Key Difference: While Standard ROAS focuses on revenue generated, Profit-Adjusted ROAS accounts for profit margins, giving a more accurate picture of profitability. | ||
1. Calculating ROAS with Profit Margins in Mind
The standard ROAS formula is simple:
Standard ROAS=Revenue Ads/Cost of Ads
But this only tells you how much revenue your ads are generating, not how much actual profit. To get a clearer picture of your marketing’s real impact, you need to calculate Profit-Adjusted ROAS:
Profit-Adjusted ROAS=(Revenue from Ads)×Profit Margin /Cost of Ads = 2
Example:
Let’s say you spend $1,000 on an ad campaign that brings in $5,000 worth of deep cleaning services, and your profit margin for cleaning is 40%. Using the profit-adjusted ROAS formula:
Revenue =5,000 × 40% = 2,000{Profit}
Instead of thinking your campaign yielded 5 dollars for every 1 dollar spent (based on revenue), you can now see that in profit terms, it’s actually only 2 dollars for every dollar spent.
Why It Matters: By applying profit-adjusted ROAS, you’ll make more informed decisions about which services to promote and where to allocate your marketing budget for the best return.
Pro Tip: For a deeper dive into calculating marketing ROI and understanding the true impact of your ad spend, check out our guide on how to calculate marketing ROI for your cleaning business.
2. Real-Life Implications of Profit-Adjusted ROAS
Allocating Ad Spend Wisely:
Understanding profit-adjusted ROAS helps you see which services are actually the most profitable to market. Higher-margin services, like deep cleaning or specialized commercial contracts, are more lucrative for your ad dollars compared to low-margin services, such as basic janitorial work.
- High-Margin Services: Focus your ad spend on high-margin services to improve profitability. Even if they bring in fewer clients, they’ll yield more profit per dollar spent.
- Low-Margin Services: While essential, lower-margin services may not justify as much marketing spend unless they bring in consistent, high-volume contracts.
Example: If deep cleaning services have a higher profit margin than standard office cleaning, directing more marketing dollars toward deep cleaning will improve your profit-adjusted ROAS, yielding higher returns.
Need help optimizing your ad spend? Check out our guide on the best Google Ads strategies for cleaning services to make sure you’re getting the most out of every dollar spent.
3. Segmenting ROAS by Service
Create a Service-Specific ROAS Dashboard:
Segmenting your ROAS by individual service gives you a detailed view of how each type of cleaning service performs. For example, if carpet cleaning has a better profit-adjusted ROAS than residential cleaning, you’ll know to scale up marketing efforts for carpet cleaning.
This segmentation ensures that your ad dollars are focused on the services that bring in the most profit rather than just the most revenue.
Track and Adjust Marketing Efforts:
Instead of looking at ROAS as a whole, break it down by service type. This way, you can adjust your marketing spend to target higher-margin services and make more profit overall.
Looking to boost your profitability through smarter systems? Check out our article on why cleaning services need a CRM for profitability insights for more ways to maximize your return.
Further Reading and Resources
For more insights into optimizing your marketing strategies and improving profitability in your cleaning business, check out the following resources:
How to Calculate Marketing ROI for Your Cleaning Service Business: A comprehensive guide on calculating marketing ROI to ensure your ad spend generates the desired returns.
Janitorial Bid Calculator: Use this calculator to estimate the costs and profitability of janitorial services to better plan your bids.
Cleaning Service Budget Template: Plan your business expenses effectively with this budget template tailored for cleaning services.
Sample Janitorial and Commercial Cleaning Business Plan: A detailed sample business plan to help guide your commercial cleaning or janitorial business strategy.
These resources will provide additional tools and insights to help you further improve your marketing, budgeting, and profitability strategies in the cleaning industry.
Conclusion: Think Beyond Simple ROAS
When it comes to marketing your cleaning business, profit-adjusted ROAS gives you a more accurate view of how your marketing is performing. By factoring in profit margins and focusing on the most lucrative services, you’ll maximize your returns and improve the overall profitability of your marketing efforts.
Key Takeaways:
- ROAS Alone Isn’t Enough: Revenue doesn’t equal profit. Always account for profit margins when evaluating your ad spend.
- Profit-Adjusted ROAS: This metric helps cleaning businesses focus on the most profitable services, not just the ones that generate the most revenue.
- Segmenting ROAS by Service: Break down ROAS by service type to make smarter marketing decisions and improve overall profitability.
By applying profit-adjusted ROAS, you can make better decisions about where to invest your marketing dollars—resulting in a healthier bottom line for your cleaning business.