What may a customer
cost you?
Before you spend a euro on ads, 1 number should be settled: what an order or a lead may cost at most. Enter your own figures and you have it.
Why revenue tells you nothing here
ROAS puts revenue against ad spend and says nothing about what you keep. At a gross margin of 10 percent, 40,000 euro of revenue yields 4,000 euro of gross profit. If that revenue cost 5,000 euro in ads, you lose 1,000 euro a month at a ROAS of 8. Your break-even point is 1 divided by your gross margin.
Two things this sum does not know. The margin on ad-driven revenue is often lower than your average margin, because ads tend to sell offers rather than your best products. And repeat purchases are not in it: if a customer pays back over a year, your ceiling may sit higher than what is shown here.
Your figures stay yours
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Want to hold this against your real numbers?
A ceiling on paper is useful. Knowing whether your measurement actually guards that ceiling is the work that follows.
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