How much can you pay for a customer?
Put in your numbers. See the most you should spend per customer and per enquiry, and where your ads break even.
You can pay up to $500 for a customer and $50 for an enquiry, and keep two thirds of every customer’s profit.
Where you stand
Add what you pay per enquiry now to see where you stand.
When a customer pays back, at your limit
A customer costs $500 at your limit. The first sale covers it, with $1,000 left over.
See the working
- Gross profit per sale Sale value × gross margin = $5,000 × 30% = $1,500.
- $1,500
- Lifetime gross profit per customer Gross profit per sale × times they buy = $1,500 × 1 = $1,500.
- $1,500
- Break-even cost per enquiry, first sale Gross profit per sale × close rate = $1,500 × 10% = $150. Pay more than this per enquiry and the first sale loses money.
- $150
- Break-even cost per enquiry, over their lifetime Lifetime gross profit × close rate = $1,500 × 10% = $150. Above this, you lose money on every customer, even after all their purchases.
- $150
- Purchases to pay back a customer, at your limit Most per customer ÷ gross profit per sale = $500 ÷ $1,500, rounded up. That is the worst case: spending your full limit on every customer. Spend less per enquiry and it pays back sooner. Add what you pay per enquiry now to see yours.
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How it works.
- Profit per sale.
Sale value × your margin.
- Profit per customer.
That × how many times they buy.
- Most per customer.
A third of it. The other two thirds stay yours.
- Most per enquiry.
That × your close rate.
Questions about ad spend.
What is break-even ROAS?
The return on ad spend where the ads pay for themselves and no more. It is 1 divided by your gross margin: at a 25% margin, you need 4x, because only a quarter of each sale is yours to spend.
How much should I spend to get a customer?
No more than a third of the gross profit a customer brings you over their life. That leaves two thirds for you, and room for the months the ads run worse than average.
What is a good cost per lead?
Whatever your numbers allow. Take the most you can pay for a customer and multiply it by your close rate. A $60 lead is cheap for a $15,000 job and expensive for a $200 one. How we run Meta ads →
Why divide by three?
It is a rule of thumb that keeps most of the profit with you and gives the ads room to have a bad month. Spending up to the full lifetime profit only breaks even, if everything goes to plan.
Is it normal not to make money on the first sale?
For repeat businesses, yes. Subscriptions, online stores and regular services often lose money winning a customer and make it back on the purchases that follow. It only becomes a problem when you cannot wait that long for the cash. Then the fix is usually the offer: a deposit, an upsell, or a first purchase that pays for itself.
What counts as gross margin?
What is left from a sale after the direct cost of delivering it: materials, product, labour on the job, delivery. It does not include rent, office wages or your ads. A $10,000 job that costs $6,500 to deliver has a 35% gross margin.
What if I do not know my close rate?
Count your last 30 enquiries and how many became customers. If you have fewer than that, try the calculator at 10% and at 20% and see how much the answer moves.
Already running ads? Get a free 6-point audit of your account, back within 48 hours.
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A few questions, then Dylan calls you within one working day and goes through them with you.
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