The Numbers You Must Know Before Running Paid Ads
Most businesses launch ads without knowing a single one of these. That's why they burn budget and blame the platform. Know your numbers first, and every dollar you spend becomes a calculated decision.
Part 1 of 3
Your Business Numbers Before You Spend a Dollar
These are the numbers that live in your business, not your ad account. If you don't know these, no ad platform can save you.
Average Revenue Per Customer (ARC)
This is the foundation. Everything else is calculated against what a customer is actually worth to you. If you don't know this, you cannot set a logical ad budget.
Example: You closed 20 jobs last month for $48,000 total. ARC = $48,000 / 20 = $2,400 per customer
Customer Lifetime Value (LTV)
How much does a customer spend with you over their entire relationship? A one-time roofer and a recurring HVAC maintenance client are not the same math.
Example: $2,400 ARC and customers return twice over 3 years. LTV = $2,400 x 2 = $4,800 lifetime
Maximum Allowable Cost Per Lead (MACPL)
This is the ceiling on what you can afford to pay for a single lead. Running ads without this number means you have no idea if you're profitable or not.
Example: LTV $4,800, you close 1 in 4 leads, target 20% CPA. MACPL = ($4,800 x 0.20) / 0.25 = $384 max per lead
Lead-to-Close Rate
Your sales team's batting average. If ads send you 50 leads and you close 10, your close rate is 20%. This number directly controls how much you can pay per lead.
Example: A 20-30% close rate on paid leads is healthy for most local service businesses. Below 15% is usually a sales process issue, not an ad issue.
Gross Profit Margin
Ads come out of margin, not revenue. A business with a 20% margin and a business with a 60% margin have completely different budgets they can justify.
Example: $2,400 job, $1,400 in labor/materials = $1,000 gross profit. GPM = $1,000 / $2,400 = 41.7% margin
Target Return on Ad Spend (ROAS)
The minimum ROAS you need to be profitable. This is your go/no-go benchmark. If ads return below this, you're losing money. If above, you scale.
Example: You spend $3,000/mo on ads and want 3x back. Target = $9,000 in closed revenue. If you're hitting $14,000, scale up.
The Richard Strategy
Know the Market, Then Build for It
Before we touch a single ad campaign, we reverse-engineer the top 20 competitors in your service area. We look at who's running Google Ads, who's on Facebook, who's ranking for what. That intel tells us exactly what demand exists and what your cost per lead will realistically look like. Then we build for it.
- Analyze top 20 local competitors before launch
- Identify gaps the market is missing
- Understand real cost per lead for your industry
- Build the landing page the market actually needs
- Compare performance service area to service area
- Rinse, repeat, and scale what's working
Part 2 of 3
Your Ad Platform Numbers to Track Weekly
Once campaigns are running, these are the numbers that tell you what's working, what's wasting money, and where to push harder.
Cost Per Lead (CPL)
The single most important in-platform metric for lead gen. Compare this against your MACPL from #03 every week. If CPL exceeds your max, you either optimize or pause.
Example: Google Ads: $20-$80 CPL is common for local services. Meta Ads: $15-$60 is common.
Click-Through Rate (CTR)
CTR tells you if your ad creative and copy are compelling enough to earn the click. Low CTR means your message is not resonating with the audience you're targeting.
Example: Google Search: 3-10% is healthy. Meta Ads: 0.8-2%+ is solid. Below 0.5% means the creative needs work.
Landing Page Conversion Rate
If your CTR is healthy but CPL is still too high, look here first. A weak landing page kills an otherwise solid campaign. Most of the time this is the problem, not the ads.
Example: A well-optimized local service landing page converts at 8-15%+. Below 5% and your landing page needs serious work before you scale budget.
Cost Per Click (CPC)
CPC tells you how competitive your keywords or audience targeting is. High CPC is not always bad if your conversion rate is high. Context matters.
Example: High CPC is OK when your close rate and job value are strong. It's a red flag when paired with low CVR.
Impression Share (Google)
On Google, this tells you what percentage of eligible searches you're actually showing up for. Low impression share from budget means you're leaving leads on the table.
Example: Low IS from budget = raise budget. Low IS from rank = improve ad quality or landing page.
Frequency (Meta Ads)
The average number of times one person has seen your ad. Too high means your audience is getting fatigued and ignoring you. This is when performance starts to drop.
Example: Watch for ad fatigue when frequency climbs above 3-4 in a 7-day window. Rotate creative, expand audience, or add retargeting.
Quick Reference
All 12 Formulas at a Glance
| # | Metric | Formula | What It Tells You |
|---|---|---|---|
| 01 | Avg Revenue Per Customer | Revenue / Customers | The baseline for every other calculation |
| 02 | Customer Lifetime Value | ARC x Repeat Jobs | Total value of one customer relationship |
| 03 | Max Allowable CPL | (LTV x CPA%) / Close Rate | Ceiling on what you can spend per lead |
| 04 | Lead-to-Close Rate | Closed / Leads x 100 | How well your sales process converts |
| 05 | Gross Profit Margin | (Revenue - COGS) / Revenue | What budget you can realistically justify |
| 06 | Target ROAS | Revenue / Ad Spend | Your go/no-go profitability benchmark |
| 07 | Cost Per Lead | Spend / Leads | Most important in-platform metric |
| 08 | Click-Through Rate | Clicks / Impressions x 100 | How compelling your ad creative is |
| 09 | Landing Page CVR | Leads / Visitors x 100 | Whether your page converts the traffic |
| 10 | Cost Per Click | Spend / Clicks | Market competitiveness of your targeting |
| 11 | Impression Share | Your Impressions / Eligible | How much of the market you're reaching |
| 12 | Frequency | Impressions / Reach | When to refresh creative to avoid fatigue |
Part 3 of 3
Red Flags That Mean Something Is Wrong
These combinations of numbers are warning signs. If you see any of these patterns, address them before you increase budget.
High CTR, Low CVR
People click your ad but leave your landing page without converting. The ad is working. The page is not. Fix the headline, offer, or speed before adding budget.
Low CTR, Low CPL
Almost no one is clicking, but your CPL looks decent. Your audience is too narrow. You're getting lucky on a small sample. It won't hold when you scale.
Good CPL, Zero Closes
Ads are working, your page is working, but you're not closing the leads. This is a sales process or lead quality issue. Check how fast you're following up.
Rising CPL Week Over Week
On Meta, this usually means audience fatigue. On Google, it may mean competitors increased bids. Either way, an upward trend in CPL needs action, not patience.
High Impression Share, Low Leads
You're showing up everywhere but no one is converting. Your keywords may be too broad, your ad copy may not match intent, or you're showing up for the wrong searches.
ROAS Below 1x
You are spending more than you're making back. Do not scale. Do not add budget. Diagnose first: is it the audience, the page, the offer, or the close rate?
Want Someone to Run These Numbers With You?
In a free 30-minute strategy call, we'll go through your business numbers together and tell you exactly what a paid ads campaign should cost and what it should return for your specific market.
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