Advertising Budget Calculator
The budget a revenue target needs, with the interval on the conversion rate it rests on and what happens when the cost per click rises as you scale.
Revenue target $250,000.00
Average order value $84.00
Orders needed 2,977
Conversion rate 2.4%
Clicks needed 124,008
Cost per click $1.35
Budget $167,410.71
cost per order $56.25
as a share of the target 67%
Does it pay for itself
gross margin on the target $130,000.00 at 52%
less the budget $167,410.71
left over -$37,410.71
margin per order $43.68
cost per order $56.25
verdict does not work on the first order: each one costs $56.25 and contributes $43.68, so it only pays back on repeat purchases
The rate came from 41 orders in 1,710 clicks
measured rate 2.4%
95% interval 1.77% to 3.24%
budget at the best case $124,145.01
budget at the worst case $226,703.77
the range $102,558.76, 61.3% of the headline figure
If the cost per click rises as you scale
at $1.35 a click $167,410.71 ← today
at $1.62 a click $200,892.86, 20% more
at $2.03 a click $251,116.07, 50% more
The chain is $250,000.00 over $84.00 is 2,977 orders, over 2.4% is
124,008 clicks, times $1.35 is $167,410.71. Every step multiplies, so an
error in the conversion rate moves the budget by the same proportion.
The conversion rate is measured on 1,710 clicks, and its interval alone
puts the budget between $124,145.01 and $226,703.77. Present the range
rather than the point estimate, because the point estimate will be wrong
and the range probably will not be.
The cost per click is not a constant. Auctions clear the cheapest,
highest-intent inventory first, so buying more volume means bidding into
worse inventory: doubling the spend buys well under twice the clicks.
Budget at a higher cost per click than you pay today, not the same one.
The conversion rate falls as you scale for the same reason. The audience
you add is further from the intent that made the original rate, so a
plan that assumes today's rate at three times the volume is optimistic
twice over.
At $56.25 an order against $43.68 of margin, the first purchase loses
money. That is a viable strategy only if you know the repeat rate and
can fund the gap, and it is the single most common way an advertising
budget quietly consumes a company.
Percentage-of-revenue budgeting is a convention, not a method. Five to
ten percent of revenue is the figure usually quoted and it says nothing
about whether the next pound is profitable. The unit economics above are
what decides that: spend while an order costs less than the margin it
brings, in the knowledge that the cost rises as you go.
A new campaign spends its first days learning. Most platforms need a few
dozen conversions before their optimisation is worth anything, so a
budget too small to produce them never leaves the learning phase and
performs worse than the same money concentrated on one campaign.
None of this is attribution. The orders here are the ones the platform
claims, and the platform is marking its own homework with a generous
lookback window. Compare against total orders in the period rather than
adding up what each channel reports.
Output is valid and updates as you type.
Fix the highlighted fields to update the output.
The arithmetic is four steps. Revenue target over average order value gives the orders needed. Orders over conversion rate gives the clicks. Clicks times cost per click gives the budget. Every calculator does that.
The answer is also optimistic in two ways that matter more than the arithmetic.
The conversion rate is measured on a sample. A 2.4 percent rate from 41 orders is consistent with anything between 1.8 and 3.2 percent, and the budget inherits that: $124,000 to $227,000 for the same target. The range is 61 percent of the headline figure.
And the cost per click rises as you scale. Auctions clear the cheapest, highest-intent inventory first, so doubling the spend buys well under twice the clicks. A budget built on today’s cost per click understates what tomorrow’s volume costs.
How to use
- Put in the revenue target, average order value, conversion rate and cost per click.
- Put in the orders and clicks the conversion rate came from, so the answer comes out as a range.
- Add the gross margin to see whether an order pays for itself on the first purchase.
Example
Revenue target $250,000.00
Average order value $84.00
Orders needed 2,977
Conversion rate 2.4%
Clicks needed 124,008
Cost per click $1.35
Budget $167,410.71
cost per order $56.25
as a share of the target 67%
Does it pay for itself
gross margin on the target $130,000.00 at 52%
margin per order $43.68
cost per order $56.25
verdict does not work on the first order
The rate came from 41 orders in 1,710 clicks
95% interval 1.77% to 3.24%
budget at the best case $124,145.01
budget at the worst case $226,703.77
the range $102,558.76, 61.3% of the headline figure
If the cost per click rises as you scale
at $1.35 a click $167,410.71 ← today
at $1.62 a click $200,892.86, 20% more
at $2.03 a click $251,116.07, 50% moreAn order costs $56.25 and contributes $43.68 of margin, so this plan loses money on every first purchase. That is a viable strategy if you know the repeat rate and can fund the gap, and it is the most common way an advertising budget quietly consumes a company.
Pitfalls
Every step multiplies. An error in the conversion rate moves the budget by the same proportion, so the rate deserves more scrutiny than the rest of the inputs put together.
Use your paid conversion rate, not the site average. Paid traffic converts differently from organic and direct, usually worse, and a site-wide rate inflated by returning customers typing your name in makes the budget look a third smaller than it is.
Cost per click is not a constant. It rises with the share of available inventory you take, and the increase is not gentle in a narrow audience. Budget at a higher figure than you pay today and treat the scaling rows above as the plan rather than the pessimistic case.
The conversion rate falls as you scale, for the same reason. The audience you add is further from the intent that produced the original rate, so a plan assuming today’s rate at three times the volume is optimistic twice over.
Percentage of revenue is a convention, not a method. The five-to-ten-percent rule says nothing about whether the next pound is profitable. Spend while an order costs less than the margin it brings, and watch that cost rise as you go.
A budget too small never leaves the learning phase. Most platforms need a few dozen conversions before their optimisation is worth anything. Three campaigns at a third of the budget each can all perform worse than one campaign with the lot.
The platform is marking its own homework. The orders it reports come with a generous lookback window and include people who would have bought anyway. Compare against total orders in the period rather than adding up what each channel claims.
First-purchase economics are not the whole story, and they are the safe place to start. Paying more than the first order’s margin is a bet on the repeat rate. Make the bet knowingly, with a number for that rate, rather than because the cost per order crept up.
Compatibility
Arithmetic in the browser: nothing is uploaded and nothing is stored.
The interval on the conversion rate is Wilson’s score interval, which stays inside 0 and 100 percent at the small order counts these rates usually come from. The budget range is the chain run at both ends of that interval, so it is the arithmetic consequence of the uncertainty rather than a guess at it.
The scaling rows apply a 20 and a 50 percent increase to the cost per click. Those are illustrative rather than modelled: the real curve depends on the auction, the audience size and how much of it you already reach. They are there to make the direction concrete.
The verdict compares the cost per order against the gross margin per order, which is the first-purchase test. It says nothing about lifetime value, deliberately: a plan that needs the second purchase should say so out loud and put a number on the repeat rate.