Profit on ad spend.
Not just return on it.
Return on ad spend tells you how much revenue your advertising produced. It doesn't tell you whether you kept any of it. Add your margin and what you pay the people running the ads, and the picture usually changes.
Your numbers
Profitable
Net profit
R0
Where the gross profit goes
| Item | Amount | Share of revenue |
|---|
How this is worked out
Gross profit is revenue × margin. It's the only money advertising can actually be paid out of, which is why revenue on its own tells you nothing.
Net profit is gross profit − ad spend − agency cost. If that's negative, the advertising costs more than the profit it brings in, even when the return on ad spend looks healthy.
Break-even return on ad spend is 1 ÷ margin, counting ad spend only. Include the agency fee and the return you need is higher, which is the figure shown here as break-even including fees.
Profit on ad spend is gross profit ÷ (ad spend + agency cost). Above 1.0 the marketing pays for itself. Below 1.0 it doesn't, whatever the platform dashboard says.
Working backwards, the ad budget a target needs is revenue target ÷ target return on ad spend. Net profit at that target is gross profit − ad budget − agency cost, and the lowest return on ad spend that still breaks even once fees are paid is revenue target ÷ (gross profit − agency cost).
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If the number surprised you
Most accounts that look profitable on platform reporting stop looking that way once margin and fees are counted. It's usually fixable: conversion values that were never set, brand search flattering the numbers, or a fee that no longer matches the budget it manages. We'll go through your accounts and tell you which one it is.
Figures are indicative and depend on the accuracy of the margin entered. Gross margin here means revenue less cost of goods and fulfilment, before overheads. The calculator doesn't account for VAT, returns, customer lifetime value or the revenue you'd have earned without advertising, all of which matter in a full assessment.