Campaign profit calculator

The calculator points to one of three situations, and each one calls for a different decision.

• Below break-even

  This campaign is costing you money

  Start by checking whether the revenue you entered covers all the sales from the campaign. When conversion tracking misses some orders, the campaign looks worse than it really is. If the data is right, look for the campaigns and products that drag the result down, and only then decide on the budget.

• At break-even

  The campaign breaks even

  Right at the edge of profitability, small things decide the result: a few per cent of returns, free shipping or a basket discount. Enter them as variable costs and watch the break-even point move (in the example below, 5% is enough to wipe out the profit). Breaking even on the first order can also be a goal if your customers come back to buy again.

• Above break-even

  The campaign is profitable

  Headroom above break-even lets you think about a bigger budget, although each extra euro spent on ads usually brings in less than the first one. So when you increase spend, keep an eye on the break-even point. To see what a larger amount could bring in, use the budget calculator.

The lower the margin, the higher the ROAS has to be for the advertising to pay for itself. The table shows the break-even points for typical margins and the maximum ad cost for every €100 of sales.

At a 10% margin, every euro spent on ads has to bring in ten euros of sales (a high bar), while at 60% the campaign breaks even at a ROAS of just 1.67 (a comfortable position, though margins like that are less common). Break-even means no profit and no loss, so it makes sense to set the campaign target higher.

• ROASrevenue ÷ ad cost
• Margin after variable costsmargin − variable costsBoth as a percentage of revenue.
• Break-even ROAS1 ÷ margin after variable costsAt a 30% margin the campaign breaks even at a ROAS of 3.33.
• Campaign profitrevenue × margin after variable costs − ad costWe leave out the company's fixed costs, because we are calculating the profitability of the campaign itself.

ExampleThe campaign brought in €10,000 of sales at an ad cost of €2,500, which is a ROAS of 4. At a 30% margin the break-even point is 3.33 and €500 is left as profit. Add 5% for shipping and returns, and the margin falls to 25%, the break-even point rises to 4.00 and the same campaign breaks exactly even.

What the calculator leaves out

The calculator covers one campaign in one period, so a few things are left out of the calculation: returns that arrive after the period closes, repeat purchases by the same customer, the agency fee and the company's fixed costs, and differences between the number of orders in the ad platform and in your shop. For a quick check of whether a campaign pays for itself, this calculation is all you need. You'll see more in an ad account audit.