Planning
Break-even ROAS and what a lead is worth
Before judging whether an ad is expensive, work out what you can afford to pay. Most accounts never do, and argue about cost per lead with no number to compare it to.
A cost per lead of 60 is a bargain for a kitchen renovation and a disaster for a carpet clean. The figure means nothing until you know what a customer is worth to you. Three numbers settle it.
The formulas
Work out yours
Break-even calculator
The starting figures are an example. Enter your own, in your own currency.
Break-even is the ceiling, not the target
At break-even you make nothing. Decide how much of the margin you are willing to give to advertising and set your target below the ceiling. Many businesses aim to spend a third to a half of the margin on winning the customer, but that is a choice about growth and cash, not a rule.
Three things that change the answer
- Repeat business. If customers come back, the first sale understates their value. You can afford to pay more for a customer who returns, as long as your cash flow can wait.
- Your real close rate. Use the rate for leads from ads, which is often lower than for referrals. Track it for a month if you do not know it.
- Costs outside the margin. Agency fees, software and your own time are real. Leave room for them.
For charities. The same logic applies with different words. Use the average gift, the share that reaches you after platform and processing fees, and for monthly donors, the number of months a typical donor stays.
Want these numbers working for you?
Tell us what you want to raise, sell or book, and we will show you what we would do first.