How much should you spend on ads, and what KPIs make it worth it?
Start by calculating your CAC ceiling, the most you can pay to win one customer and still break even, from profit per order, average order value and close rate. If the ceiling is below the market median, fix your offer or price before you run ads. Then split the budget by funnel layer, set KPIs and build a forecast from the same set of numbers.
- The core
- The CAC ceiling
- Output
- A 5-tab Excel media plan
- Feeds into
- M7 Launch and M8 Dashboard
What M5 solves
- You throw money at ads without a plan and don't know how much to spend or how to split it, so the budget runs out fast and results are hard to measure.
- You run ads that never pay back because your cost per result is higher than your profit per order, so the more you spend, the more you lose.
- You can't measure results because you have no target KPIs, so you look at the dashboard and can't tell whether to keep, adjust or stop.
What you'll do in this module
- 1
The economics behind the ad
Calculate the CAC ceiling from profit per order, average order value, close rate and customer lifetime value.
- 2
A feasibility check
Compare the CAC ceiling with the market median. If it's too low, go back and fix the offer or the price first.
- 3
Campaign structure
Set up the campaign, ad set and ad levels with goals that match your funnel.
- 4
Budget split and KPIs
Set the acceptable cost per result, ROAS, click-through rate and reach cost for each layer.
- 5
Forecast
Use your budget and target costs to forecast the number of results, then multiply by average order value to estimate sales.
The M5 prompt
This module's prompt is part of the Skill File that students receive when they finish the course, because it only works properly together with the output of the earlier modules.
Right now, 3 modules that work on their own are free to use: M1 Business analysis, M3 Competitor analysis and M10 Tracking check
FAQ
What is the CAC ceiling?
It's the most you're willing to pay to win one customer and still make a profit, calculated from profit per order together with your close rate. If your real cost is above this ceiling, the more you spend, the more you lose.
What click-through rate (CTR) counts as normal?
The median APD uses as a starting point is roughly 1 to 2 percent, but you need to adjust it for your industry and confirm it with your own ad account data before you make decisions.
What's the difference between reach and impressions?
Reach is the number of people who saw your ad, without counting the same person twice. Impressions is the number of times the ad was shown. Divide impressions by reach and you get frequency, which tells you how many times the same people saw the ad.
How much should I spend per day when I start?
There's no fixed number, because it depends on your CAC ceiling and your product price. The principle: spend enough for the system to collect data in a reasonable time, but not so much that you get hurt if your assumptions are wrong. The course walks you through calculating it from your own real numbers.
What if my CAC ceiling is below the market median?
It means your business model can't yet support the cost of advertising. Go back and fix your offer, adjust your price, raise your average order value or improve your close rate first. Running ads right away in this state would lose money from the start.