Marketing & agency
Advertising ROI Calculator
Works advertising return, where return on ad spend and return on investment differ.
Result
Simple payback, with no discounting and no financing cost. For anything large or long, money now is worth more than money later and a lender will want interest, both of which make the real return lower than this.
Get a Free Business AuditHow the calculation works
Two figures are shown because they answer different questions. Return on ad spend is revenue divided by spend, which is the platform's framing. Return on investment is margin less spend divided by spend, which is the business's. The second is lower and it is the one that decides whether to continue.
What moves the number
- Gross margin on the revenue generated.
- Spend including management and creative costs.
- Attribution window.
- Incrementality, meaning what would have happened anyway.
Where this one goes wrong
Platforms report revenue against spend because it is the figure that looks best, and a business using it to judge profitability is reading a marketing report rather than a financial one. Calculate both and decide on the second. Incrementality is the harder question: some of the attributed revenue would have arrived anyway, particularly from branded search and retargeting, which means attributed return overstates true return by an amount only a holdout test can measure.
Before you quote
- Calculate both return on ad spend and return on investment.
- Include management and creative cost in the spend.
- Consider incrementality on branded and retargeting campaigns.
Questions
About this calculator
What is the difference between ROAS and ROI?
Return on ad spend is revenue divided by spend, which is the platform's framing. Return on investment takes the cost of delivery out first and subtracts the spend, which is the business's. The second is lower and it is the one that decides.
What is incrementality?
Whether the attributed revenue would have happened anyway. Branded search and retargeting capture demand that largely existed, which means attributed return overstates true return by an amount only a holdout test can measure.
Should management fees be in the spend?
Yes, along with creative production. A campaign evaluated on media spend alone ignores a real cost of running it, and in a managed account that cost can be a substantial share of the total.
The formula
payback = cost / (monthly gain - monthly running cost)
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Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- Up-front cost ($). Enter your own figure; the page starts at $12,000.
- Extra gross profit per month ($). Enter your own figure; the page starts at $1,400.
- Extra running cost per month ($). Enter your own figure; the page starts at $220.
- Period to judge it over. Enter your own figure; the page starts at 36.
The result updates as you type, so you can try a figure, see what it does to payback period, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Up-front cost | $12,000 |
| Extra gross profit per month | $1,400 |
| Extra running cost per month | $220 |
| Period to judge it over | 36 |
What comes out
| Result | Value |
|---|---|
| Payback period main result | 10.2 |
| Net gain per month | $1,180 |
| Net return over the period | $30,480 |
| Return on investment | 254% |
It pays for itself in 10.2 months and returns $30,480 over 36 months, a 254% return.
How sensitive the answer is
Holding everything else steady and changing only up-front cost, this is what happens to payback period. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Up-front cost ($) | Payback period |
|---|---|
| $6,000 | 5.1 |
| $9,000 | 7.6 |
| $12,000 example above | 10.2 |
| $18,000 | 15.3 |
| $24,000 | 20.3 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Up-front cost ($)
- A money amount, starting at $12,000.
- Extra gross profit per month ($)
- A money amount, starting at $1,400.
- Extra running cost per month ($)
- A money amount, starting at $220.
- Period to judge it over
- A number, between 0 and 240, starting at 36.
What the results tell you
| Result | What it is |
|---|---|
| Payback period | The headline result. A decimal figure. |
| Net gain per month | A money figure. |
| Net return over the period | A money figure. |
| Return on investment | A percentage. |
Attribution is the weak link
Return and cost-per-lead figures depend on knowing which enquiries came from which source, and most home-services businesses do not track that reliably. If the source data is guesswork, so is the return.
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.