"Are the ads working?" can't be answered with clicks or likes. You need a few numbers that connect ad spend to money in the bank. Let's go through them with a simple example.
Key metrics
- CPC — cost per click. Spend ÷ clicks.
- CR — conversion rate. Leads ÷ clicks × 100%.
- CPL — cost per lead. Spend ÷ leads.
- CPA — cost per acquisition (customer or sale). Spend ÷ sales.
- ROAS — revenue ÷ ad spend.
- ROMI — (gross profit − spend) ÷ spend × 100%.
An example
You spent $1,000 and got 500 clicks (CPC $2). 25 of them became leads — a 5% conversion rate and a $40 CPL. Sales closed 5 leads — a $200 CPA. The average ticket is $600 with a 50% margin, so gross profit from sales is $1,500.
ROAS = $3,000 ÷ $1,000 = 3. ROMI = ($1,500 − $1,000) ÷ $1,000 = 50%. The ads pay back and make a profit.
How much you can pay per lead
Work backwards. If a customer brings $300 of gross profit and one in five leads becomes a sale, your break-even CPL is $60. Anything cheaper is profit; anything more is a loss. This number is the main benchmark for any campaign.
Why CPL alone isn't enough
Cheap leads are often empty: they don't answer, wrong city, just curious. A channel with a $20 CPL can be worse than one with a $50 CPL if the second closes three times as many leads. That's why you need to see a lead's path all the way to payment — the job of a CRM and end-to-end analytics.
LTV: when a loss on the first sale is fine
If customers buy again (subscriptions, service, consumables), measure payback by LTV — revenue per customer over their lifetime. Then you can afford a CPA above first-sale profit and outbid competitors.
What to set up to track this automatically
- UTM tags on every ad link.
- Lead source passed into the CRM.
- Deal stages and payment amounts in the CRM.
- A channel report: spend, leads, sales, revenue.
We set up marketing analytics from $250 so you see the payback of every campaign, not just clicks. These metrics are also the backbone of our traffic course.