How do you calculate ROAS when the real value is spread over 6–12 months?

Question

We sell a SaaS product and get most of our revenue over time through monthly subscriptions. But Facebook and Google only show immediate purchase value. How do you calculate ROAS when the real value is spread over 6–12 months?

Answer 1

When your product’s real value comes from ongoing subscriptions rather than one-time purchases, the standard “ad spend vs. immediate purchase revenue” ROAS will always undervalue your campaigns.

To get a more accurate picture, you need to factor in Customer Lifetime Value (LTV) and use that instead of or alongside short-term revenue. Here’s how to do it:

1. Calculate Your Average Customer Lifetime Value (LTV)

Formula:

LTV=Average Monthly Revenue per User (ARPU)×Average Customer Lifespan (in months)\text{LTV} = \text{Average Monthly Revenue per User (ARPU)} \times \text{Average Customer Lifespan (in months)}LTV=Average Monthly Revenue per User (ARPU)×Average Customer Lifespan (in months)

Example:

• ARPU = $50/month

• Average customer stays = 8 months

• LTV = $50 × 8 = $400

2. Adjust Your ROAS Calculation

Traditional ROAS:

ROAS=Immediate Revenue from AdsAd Spend\text{ROAS} = \frac{\text{Immediate Revenue from Ads}}{\text{Ad Spend}}ROAS=Ad SpendImmediate Revenue from Ads​

LTV-Based ROAS:

LTV-ROAS=Number of New Customers from Ads×LTVAd Spend\text{LTV-ROAS} = \frac{\text{Number of New Customers from Ads} \times \text{LTV}}{\text{Ad Spend}}LTV-ROAS=Ad SpendNumber of New Customers from Ads×LTV​

Example:

• New customers from ads = 100

• LTV = $400

• Ad spend = $10,000

• LTV-ROAS = (100 × 400) ÷ 10,000 = 4.0 (or 400%)
   

3. Break It Down by Payback Period

Your CFO/finance team will care about how quickly you recover ad spend. This is Time to Payback:

Payback Period=CACARPU\text{Payback Period} = \frac{\text{CAC}}{\text{ARPU}}Payback Period=ARPUCAC​

Example:

• CAC (Cost to Acquire Customer) = $100

• ARPU = $50/month

• Payback = 2 months

If your payback period is too long, you might run into cash flow issues even if your LTV-ROAS is strong.

4. Track Cohorts

• Create cohort reports in GA4, your CRM, or a BI tool to track users acquired in specific date ranges.

• Measure their retention, churn, and revenue over time.

• Compare paid cohorts vs. organic to see if ad-acquired customers have different LTVs.

5. Feed LTV Back Into Ad Platforms

• Use value-based bidding in Google Ads & Facebook Ads.

• Pass LTV or predicted revenue via offline conversions / server-side tracking.

• This trains the algorithm to prioritize customers with higher future value, not just quick wins.

Pro Tip: Many SaaS companies underestimate the damage of churn. Even if your acquisition looks good, a small increase in churn rate can destroy LTV-ROAS. Always pair acquisition metrics with retention analysis.