Advertising ROI Calculator

by | Feb 17, 2019 | Online Advertising | 0 comments

Running PPC Ads Is A Must!…Or is It?

There’s no question that online advertising is a vital part of any digital marketing campaign. It holds a particularly special place in my heart as the most important skill to master for it was the very first thing I ever learned to do as an intern at a digital agency. Now, after 7+ years of managing ads for various brands and individuals, it has become much more common knowledge that running ads is a must if you want to grow a business online…. or is it???

You see, as more and more people have started running ads on Google and Facebook, the cost per click has gone up. Where I recall running ads for around $0.10 per click, the same campaign now has to bid over $2 per click. This is important to note because not every campaign is profitable and if you start running ads before you are ready, you can end up losing a lot of money.

Why it’s important to set the right budget for your campaign

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency”

Bill Gates

Founder, Microsoft Corporation

Bill Gates said it best when speaking about automation exposing inefficient systems. Ads, to me, are in a lot of ways a form of automation for your business. They help scale your current money-making business. But, if you do not know how to properly measure and define your budget for your ads, you could be setting yourself up to run a losing campaign. In an effort to make things as simple as possible, I have built a few calculators below that will help guide you on what data points you need to measure and how you can design a profitable ad campaign.

 

How to Use This Guide

9

CUSTOMER LIFETIME VALUE CALCULATOR

To begin, you will need to calculate your customer(s) lifetime value. This is an important metric to measure for it is how we will understand if we are truly generating a profit from our ad campaigns.

7

CUSTOMER LIFETIME VALUE CALCULATOR

To begin, you will need to calculate your customer(s) lifetime value. This is an important metric to measure for it is how we will understand if we are truly generating a profit from our ad campaigns.

9

SERVICE-BASED OR B2B AD SPEND & ROAS CALCULATOR

After you’ve calculated your customer LTV, I have provided two variations of my Ad Spend & ROAS calculators. The first one is primarily designed for businesses that focus on selling services and usually require additional steps to generate revenue beyond just a checkout on the site (like a consultation call or form entry). Any business that focuses on driving generating LEADS through its marketing campaigns should use the first calculator.

7

SERVICE-BASED OR B2B AD SPEND & ROAS CALCULATOR

After you’ve calculated your customer LTV, I have provided two variations of my Ad Spend & ROAS calculators. The first one is primarily designed for businesses that focus on selling services and usually require additional steps to generate revenue beyond just a checkout on the site (like a consultation call or form entry). Any business that focuses on driving generating LEADS through its marketing campaigns should use the first calculator.

9

E-COMMERCE AD SPEND & ROAS CALCULATOR

The second calculator is designed for e-commerce or subscription-based businesses where customers checkout directly on their site.

 

7

E-COMMERCE AD SPEND & ROAS CALCULATOR

The second calculator is designed for e-commerce or subscription-based businesses where customers checkout directly on their site.

 

Google Ads Keyword Planner

Use The Google Ads keyword planner to find your expected CPC.

Customer Lifetime Value Calculator

Company's Total Revenue
How much revenue does your company average per year (or month)?
Number of Purchases:
If you're a service based business, how many invoices got paid in the time frame you are measuring? For E-commerce, how many total purchases were made?
Number of Customers:
How many customers did you have through out this time frame?
Average Customer Lifespan:
Number of months a customer continues to buy from your business.

Results

Average Purchase Value:
$0
Average Purchase Frequency Rate:
0.00
Customer Value:
$0.00
Customer Lifetime Value:
$0.00

Service-Based Or B2B Ad Spend & ROAS Calculator

Projected Monthly Budget
How much are you planning to spend on your ads? Normally, you want o spend a minimum of $10 per day to test any ad campaign so you can start with that. Mess around with the numbers to make sure you produce a profitable campaign.
Expected CPC
How much are you going to bid on a click? You can use the Google KeyWord Planner and Display Planner as well as Facebook Ads for help estimating your CPC for your campaigns.
Conversion Rate
How often does a visitor convert into a lead on your website? Conversion rates vary depending on your industry. But on average you should strive to have a conversion rate of 2% or above.
Average Sale Price or Lifetime Value Of Customer (LTV)
How much revenue do you get per customer on average? For many companies this number may vary or increase over time. If you sell a lot of one-time services, use Average Sales Price, if you offer monthly packages/services calculate your LTV using the form at the beginning of this blog post.
Lead to Customer Rate
What percentage of your leads turn into Customers? This is one of the most important KPIs to track. Any increase or decrease on your L2C rate drastically effects the profitability of your ads.

Results

Number of Clicks:
0
Number of Leads:
0
Cost-Per-Lead:
$0.00
Value of a Lead:
$0.00
Expected Revenue:
$0.00
Net Profit:
$0.00
ROAS (X):
0.00

E-Commerce Ad Spend & ROAS Calculator

Projected Monthly Budget
How much are you planning to spend on your ads? Normally, you want to spend a minimum of $10 per day to test any ad campaign so you can start with that. Mess around with the numbers to make sure you produce a profitable campaign.
Expected CPC
How much are you going to bid on a click? You can use the Google KeyWord Planner and Display Planner as well as Facebook Ads for help estimating your CPC for your campaigns.
Conversion Rate
How often does a visitor convert into a paying customer on your website? Your product page should yield a high conversion rate if your ads are well targeted. A realistic goal for a campaign would be to average around 2%-5% conversion rate. If you pass 5% that would be an A+ campaign.
Average Sale Price or Lifetime Value Of Customer (LTV)
How much revenue do you get per customer on average? Calculate your Customer LTV using the form at the beginning of this blog post.

Results

Number of Clicks:
0
Number of Customers:
0
Cost-Per-Customer:
$0.00
Expected Revenue:
$0.00
Net Profit:
$0.00
ROAS (X):
0.00

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