If you want to calculate how many leads/sales you can get from a budget, you can do this with a simple equation. You just need to know a few numbers:
- how much you can spend (budget)
- how much your cost per click is (CPC)
- what is your conversion rate (CTR)
Here is the simple formula:
(Budget / CPC) / CTR
For example, if you want to know how many sales you’ll get from a specific budget, you’ll also need to know your average cost per click and conversion rate.
Let’s say that, for example, you have a $5,000/mo ad budget, a CPC of $7, and a conversion rate of 4%. Here is how you would calculate the amount of sales you’d get from this budget:
($5000 / $7) * 0.04 = ~28 sales
Now that you know how many sales to expect from known factors (like budget, CPC, and CTR) you can then determine what sort of pricing and margins makes your campaign profitable.
If your sales were pure profit (100% margin), for example, you’d need to have an average sale of at least $178.57 for the above example.