Answers · Calculator
Marketing ROI calculator
This calculator turns five numbers you already have (what you spent on marketing in a period, the inquiries it brought, the share you won, your average job value and your margin) into cost per inquiry, cost per customer, gross and net return, margin earned per dollar spent and the close rate at which the spend breaks even. It is arithmetic on your own numbers, not a forecast, and the numbers you type are not stored or sent anywhere.
Run your own numbers
The fields hold example numbers, made up to show the arithmetic. Replace them with your own. Money is in dollars.
Results, in dollars unless marked
- Customers won
- 10
- Cost per inquiry
- 50
- Cost per customer
- 200
- Gross return: revenue from those customers
- 8,000
- Margin earned
- 3,200
- Net return: margin earned minus spend
- 1,200
- Margin earned per dollar spent
- 1.60
- Net return as a share of spend
- 60%
- Break-even close rate
- 15.6%
Without JavaScript the fields do not recompute: the results shown are the worked example.
How the numbers are worked out
- Cost per inquiry = spend ÷ inquiries.
- Customers won = inquiries × the share that became customers.
- Cost per customer = spend ÷ customers won.
- Gross return = customers won × average job value.
- Margin earned = gross return × margin.
- Net return = margin earned − spend.
- Margin earned per dollar spent = margin earned ÷ spend.
- Net return as a share of spend = net return ÷ spend. This is the figure often meant by ROI.
- Break-even close rate = spend ÷ (inquiries × average job value × margin): the share of inquiries you would have to win for the margin earned to equal the spend.
The worked example
Made-up numbers, chosen to keep the arithmetic easy to follow. They are not anyone's real figures, and they say nothing about what marketing costs.
| Step | Example |
|---|---|
| Marketing spend for the period | 2,000 |
| Inquiries it brought in | 40 |
| Share that became customers | 25% |
| Average job value | 800 |
| Margin | 40% |
| Cost per inquiry | 50 (2,000 ÷ 40) |
| Customers won | 10 (40 × 25%) |
| Cost per customer | 200 (2,000 ÷ 10) |
| Gross return | 8,000 (10 × 800) |
| Margin earned | 3,200 (8,000 × 40%) |
| Net return | 1,200 (3,200 − 2,000) |
| Margin earned per dollar spent | 1.60 (3,200 ÷ 2,000) |
| Net return as a share of spend | 60% (1,200 ÷ 2,000) |
| Break-even close rate | 15.6% (2,000 ÷ (40 × 800 × 40%)) |
What to put in each field
- Spend: everything the channel cost you in the period: ad money, the fee for each lead if you pay per lead, and what you paid anyone to run it. If you only have the ad money, the result flatters the channel a little. The related answer on what a lead generation company does covers paying per lead.
- Inquiries: real inquiries from that channel in that period, counted from your own records, not clicks, impressions or reach. The related answer on cost per click, impressions and reach explains what those ad-report figures do and do not tell you.
- Share that became customers: inquiries won ÷ inquiries that ended won or lost, over the same period, or a longer one if the period is short.
- Average job value: what a typical first job from these customers brought in, from your invoices. Use the typical job, not the best one.
- Margin: what is left of a job after the direct cost of doing it, as a percent of the job.
How to read the result
A net return above zero means the period paid for itself on first jobs alone. A net return below zero is not always a channel to drop: repeat work and referrals are not counted here, so a customer who comes back can turn the figure positive. The customer lifetime value calculator gives that fuller picture, and the related answer on what a customer is worth explains why the cost per customer should sit below it.
Judge a channel over months rather than weeks. Search usually builds over months, while an ad usually shows its effect sooner, so a short period can make the slower channel look worse than it is. The related answer on how to know if your marketing is working lists the numbers to track every month.
The break-even close rate is often the most useful line. If you are winning a smaller share than it says, the spend is not paying back on first jobs, and the fix may be in the replies and the follow-up rather than in the spend. The inquiries calculator works the other way round, from a goal to the inquiries it takes. This is arithmetic on your own numbers, not a forecast.
Related answers
- What do cost per click, impressions and reach mean in an ad report?
- What does a lead generation company do, and should you pay per lead?
- How do you know if your marketing is working?
- How do you work out what a customer is worth to your business?
The other calculators
- Customer lifetime value calculator: Average sale, purchases a year, years a customer stays and margin give lifetime value, the most to spend to win a customer and the figure per inquiry.
- How many inquiries do you need? A calculator: Turn a monthly revenue or jobs goal, job value, close rate and show rate into the inquiries you need each month and week, and the gap by channel.
Lead generation and lead tracking
A lead that waits a day goes cold, and a lead with no source teaches you nothing. Ascent Vision fixes both.