Quickly calculate if you're going to be profitable with advertising!
Not sure what each metric is? Read the guide
You will need 10 visits to make a sale
A visitor is worth $10 on average
You will reach 10 people
You will get 10 clicks
You will get 1 sales, for a total of $10
You will make $10 of profit
Tips & warnings:
- 💡 A visitor is worth $1 it means you should avoid paying more than that for a click.
- 🚨 Your average sales value is low. It might be hard to be profitable with ads. Try to find a way to get recuring revenues from your users, or add upsells.
- 🚨 Your conversion rate (CR%) is low. Try to improve your landing page. Make split-tests with different design and copy. Remember, by improving your CR% from 1% to 2%, you basically double your revenues.
- 🚨 Your CPM is high. It might be worth to target a broader audience to lower your costs. Also make sure to follow the good practices of the platform you're using, as it can lower your CPMs.
- 💡 Your CPM is low. It's not a bad thing, but make sure your audience is targeted enough, a bad audience will have a low CTR %.
- 🚨 Your CTR seems low. Try to improve your creative (image & copy) to make the ad more remarkable and catchy. It can also be worth testing other audiences.
- 🚨 100 clicks might not be enough to get a statistically significant result. Try to get at least 500 clicks to make sure your results are accurate.
- 🚨 The projected profit is negative. It might be hard to be profitable with ads. You can try to improve your metrics, improve your profit, or lower your costs.
- 💡 It seems like ads could be profitable for you. If you can keep a consistent acquisition cost, you can scale your business with ads.
What are those numbers?
Average Sale Value / Lifetime value
If you have one-time purchases, this is how much customers spend on average (including repeated purchases)
If you sell subscription, it's the total amount of revenue you get from one customer (ex: over one year).
Profit per sale
This is the amount of money you make on each sale. If you sell a product for $20, and you have $3 of costs, the profit per sale is $17.
This is the %age of people who buy your product compared to the visitors. If you have 100 visitors, and 3 of them buy your product, your conversion rate is 3%.
CPM (Cost Per 1000)
This is the cost per 1000 impressions. If you pay $10 for 1000 impressions, your CPM is $10.
CTR (Click-trough rate)
This is the percentage of people who click on your ad. If your ad get 1000 impressions, and 15 people click on it, the CTR is 1.5%.
This is the amount of money you want to spend on ads.