How to plan a paid media budget
Before spending on Google, Meta, TikTok or any other paid media, it helps to know what the budget can buy and how much each sale may cost. A few averages from previous campaigns are enough to turn a budget into a sales forecast.
From budget to sales
- Clicks = budget ÷ cost per click (CPC).
- Impressions = clicks ÷ click-through rate (CTR).
- Sales = clicks × website conversion rate.
- Revenue = sales × average order value.
How much you can pay
Maximum CPA = average order value × contribution margin: the most a sale can cost before it stops paying for itself. Maximum CPC = maximum CPA × conversion rate: the most it is worth bidding per click. With a $90 order value, a 40% margin and 2.5% conversion, the maximum CPC is $0.90.
The lever that is in your hands
CPC depends on the auction and on competitors; conversion depends on your page, price and offer. Raising conversion from 2.5% to 3.25% has the same effect as cutting CPC by almost a quarter, and it improves every channel at once.
Scale carefully
Increasing the budget does not keep the same averages: the platform has to reach less interested people and the click gets more expensive. Raise spend in steps and watch CPA and ROAS week by week.