What return on ad spend do I need?

One over your gross margin. At a forty percent margin, you break even at 2.5, so anything below that loses money regardless of how the headline looks.

Businessmarketing

Ad Budget Calculator

Ad budget worked backwards from a revenue target. The test is not whether the campaign returns more than it costs, but whether the gross profit per order exceeds the cost of acquiring it.

Also called: marketing budget calculator, ppc budget.

Budget required

₹16,36,364

₹16,36,364 to reach ₹50,00,000, needing 90,910 clicks for 2,000 orders. Your cost per acquisition is ₹818 against ₹1,125 of gross profit, so the campaign makes money on the first order.

Orders needed

2,000

Clicks needed

90,910

Cost per acquisition

₹818

Gross profit per order

₹1,125

Return on ad spend

3.06

Verdict

makes money on the first order.

How this is calculated

Method and background

How this is calculated

The chain runs target revenue, orders, clicks, spend. What makes it useful is the last comparison: cost per acquisition against gross profit per order, not against revenue per order. A campaign returning three times its spend on a fifteen percent margin is losing money, and comparing against revenue hides that.

work backwards from the revenue target through orders and clicks to spend

R: Revenue target
c: Conversion rate

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a 50 lakh target

Revenue target: ₹50,00,000
Average order value: ₹2,500
Conversion rate: 2.2%
Cost per click: ₹18
Gross margin: 45%

Budget required₹16,36,364

2000 orders at a 2.2% conversion needs 90,909 clicks

Open this example

a perfect conversion rate needs one click per order

Revenue target: ₹50,00,000
Average order value: ₹2,500
Conversion rate: 100%
Cost per click: ₹18
Gross margin: 45%

Budget required₹36,000

boundary

Open this example

Method and limits

What it assumes

Conversion and click cost hold as spend scales, which they usually do not.

What it deliberately does not model

Cost per click rises as you buy more inventory, so the budget understates at scale.
It ignores repeat purchase, which is what makes a break-even first order rational.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

What return on ad spend do I need?: One over your gross margin. At a forty percent margin, you break even at 2.5, so anything below that loses money regardless of how the headline looks.