Anthony McGrathHow to work out your target CPA
Your cost per acquisition (CPA) can rise until it eats all the profit from a sale. That point is your break-even CPA. Set your target below it to keep some profit.
Break-even CPA = sale value (without VAT) × margin before ads
Target CPA = break-even CPA − profit you want to keep
Target ROAS = sale value ÷ target CPA
Max CPC = CPA × conversion rate
Max cost per lead = CPA per sale × share of leads that buy
Using it in Google Ads and Meta
In Google Ads, enter the target CPA in a Maximise conversions campaign, or the target ROAS (as a percentage) in Maximise conversion value. In Meta, a cost per result goal (cost cap) works the same way. Start a little above your target and bring it down as results come in.
Repeat customers
If customers buy again, the first order does not need to make a profit. Raise Orders per customer to see the CPA you can afford on lifetime profit, but only use it if your repeat rate is real.
Questions
What is a good target CPA?
One that leaves you profit. Work out your break-even CPA from your sale value and margin, then set the target below it by the profit you want to keep.
How is target ROAS related to target CPA?
Target ROAS = sale value ÷ target CPA. A £120 sale with a £36 target CPA is a target ROAS of 3.33, entered as 333% in Google Ads.
How do I calculate a maximum cost per click?
Multiply the CPA you can afford by your conversion rate. If you can pay £36 per sale and 3% of clicks buy, you can pay up to £1.08 per click.
What is the most I should pay for a lead?
Multiply the CPA per sale by the share of leads that become customers. If a sale can cost £300 and one lead in five buys, a lead can cost up to £60.
Should I include VAT?
No. VAT is not your money. If your prices include VAT, tick the box and the calculator takes it out before working out profit.