PPC ROI Calculator

Lifetime Customer Value

Start by estimating how much a customer is worth for you over the life of their contract.  Some businesses like MSPs or cybersecurity companies may have widely varying total contract values and may need to account for outliers to develop and estimated average, where companies like SaaS companies may have more predictable average lifetime values.

Landing Page Conversion Rates

The next variable you would want to account for is your landing page's conversion rates.  For companies starting out a baseline landing page conversion rate of 3% can be used.  If you have historical data available from a previous advertising campaign or from organic search data, this can also be used to estimate conversion rates.

Lead To Close Ratio

Every lead isn't going to close.  For service businesses, they may close between 10 and 30% of leads generated.  SaaS companies will only convert a percentage of free trial signups, or demos booked into customers.  It's important to account for lead to close rates when thinking about potential PPC ROI.

Monthly Ad Spend

You can use your monthly spend here, or your total campaign spend, but the result is the same.  Pay per click platforms cost money to get your ad(s) out in front of people.  The amount you spend can significantly influence the volume of leads and customers generated.

Estimated Average Cost Per Click

Tools like Google Keyword planner can help you estimate the average cost per click for the targeting settings you want, but the best way to get feedback on estimated cost per clicks is by running a test campaign.  Most advertising platforms can help you cap your cost per click at a set number, if you need to maintain that to make the numbers work. In most cases we recommend leveraging automation and letting the machine learning algorithms do their work without constraining cost per click however.

PPC ROI Calculations Generated

Once you've gotten together your input, enter them into the appropriate fields in the calculator click the Estimate PPC ROI button. The calculator will then generate an estimated revenue figure based on your costs, conversion rates, customer values, and spend amounts.  This gross revenue figure will be divided by your campaign spend in order to generate and estimated return on ad spend.  Generally most businesses need to make at least a 3x return on ad spend for pay per click to be worthwhile, but in many cases higher multiples are generated, especially as you continue to advertise and refine both campaigns, and landing page conversion rates.

Projecting Cash Flows

It's important to understand that PPPC spend is a front loaded investment with a deferred return over the lifetime of a customer.  When considering to make an investment in pay per click advertising, consider the cash flow impacts. Below is a chart where a company is spending $5,000 a month on pay per click and acquiring one customer per month.  Each customer pays $1,500 a month over a two year period for a $36,000 total lifetime value. This chart assumes the company invests in PPC over a 2 year period and take 4 years to fully realize all the revenue the PPC acquired customers would yield.

A couple of interesting notes on the cash flow analysis.

• Monthly revenue exceeds monthly spend by month 4
• Total revenue generated exceeds total PPC investment by month 6
• Total estimated revenue generated is $864,000
• Total PPC investment is $120,00
• 7.2X Return On Ad Spend

Planning for cash flow considerations is an important part of making a PPC investment.