Today I want to unpack why I prefer having a higher budget with a lower ROAS rather than a smaller budget with an extremely high ROAS.
Now, I know that sounds a bit controversial, but stick with me, and I'll break down why this approach actually makes more sense in the long run.
The Common Misconception About ROAS
Let's start with a question.
Would you rather have 10% of R100,000 or 5% of a million?
Now, before you answer, take a moment to really think about it.
It might seem like a no-brainer, but the math here is what's crucial.
Let's do it quickly.
10% of R100,000 is R10,000.
But 5% of a million? That's R50,000.
So, what do you prefer—R10,000 or R50,000?
If you're smart, you're going to take the R50,000 every time.
And this same logic applies to your advertising budgets and ROAS.
ROAS: The Good, The Bad, and The Misleading
First off, ROAS stands for Return on Ad Spend, and it's basically a percentage that tells you how much revenue you're getting back from your ad spend.
So, if you invest R10,000 into ads and get a 5x ROAS, that means you're pulling in R50,000 in revenue.
Sounds great, right?
But here's where things get misleading.
ROAS doesn't tell you the full story.
It's just a percentage, a surface-level metric that doesn't account for your overall profitability.
If you're not looking deeper, you might be leaving money on the table.
The Reality of Scaling Ad Spend
The more you spend, the harder it is to maintain a super high ROAS.
That's just how it is, and it's something you need to accept if you want to scale your business.
Can you keep a high ROAS while increasing your budget?
Maybe, but it's going to be tough.
What you should be asking yourself instead is, "How much profit am I actually making back?"
Balancing ROAS and Budget: The Sweet Spot
So, how do you find that sweet spot between ROAS and budget?
First, let's acknowledge that ROAS is important, but it's not the only metric that should guide your decisions.
You need to consider other factors like customer acquisition cost (CAC), lifetime value (LTV), repeat customer rate, operating expenses, and gross margins.
These are the numbers that tell you if your business is truly healthy and scalable.
For example, can you negotiate better deals with suppliers to improve your gross margin?
Can you reduce your transaction fees with payment gateways?
Last month, we paid R150,000 just in transaction fees for about 3,000 orders.
Those are the kinds of expenses you need to manage if you want to scale effectively.
Why Understanding Your Numbers is Non-Negotiable
Here's the deal—if you don't understand your numbers, you're not really running a business.
You're just winging it.
And that's a recipe for disaster.
Knowing your numbers allows you to make informed decisions that actually move the needle.
It's what separates a business owner from someone who's just playing at being an entrepreneur.
If you want to build, scale, and eventually sell your business, you need to get comfortable with the financials.
Final Thoughts: Focus on What Really Matters
So, what's the takeaway here?
ROAS is a useful metric, but it's not the whole story.
If you really want to grow your business, you need to look beyond ROAS and focus on the bigger picture.
That means understanding your numbers, managing your costs, and scaling smartly.
It's not just about how much you're spending—it's about how much you're getting back in profit.
Because at the end of the day, profit is what keeps the lights on—not percentages.
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