If you don’t know what it costs to win a customer, you can’t tell if your marketing is making money. Here’s how to work it out and what to do with the number.
Most brand owners can tell you how much they sold last month. Far fewer can tell you what it cost to win each of those customers. That second number is the one that tells you if your marketing is making money or quietly losing it.
Here's how we work it out for our clients, step by step.
1. Work out what you're paying now
Your cost per customer is usually called cost per acquisition (CPA). The maths is simple:
CPA = what you spent on ads ÷ number of sales from those ads
If you spent ₦300,000 on Meta ads last month and got 60 orders, your CPA is ₦5,000. Every sale cost you ₦5,000 in ad spend.
Check the platform's numbers against the orders in your store. Ad platforms can over-count sales, so if the two are far apart, find out why before you trust either one.
2. Work out the most you can afford to pay
A CPA of ₦5,000 means nothing on its own. It's only good or bad compared to what you make on each sale. Start with your break-even CPA:
Break-even CPA = selling price minus product cost minus delivery and fees
Say you sell a dress for ₦25,000. It costs ₦10,000 to make, and delivery and payment fees come to ₦3,000. That leaves ₦12,000. If you pay more than ₦12,000 to get a sale, you lose money on that order.
Break-even isn't the goal, though. You want profit, so set a target CPA that leaves room for it. If you want 20% profit on each ₦25,000 sale, that's ₦5,000 you keep. Your target CPA is ₦12,000 minus ₦5,000, which is ₦7,000.
3. Compare what you pay with what you can afford
Now put your actual CPA next to your target and break-even numbers:
- Below your target CPA: your ads are working, and you have room to spend more.
- Between target and break-even: you're making sales but little or no profit. Fix your creative, offer or product page before you spend more.
- Above break-even: you're losing money on every order. Pause and find out why before you spend another naira.
In our example, a ₦5,000 CPA against a ₦7,000 target means the ads are doing their job.
4. Look at the full picture before you decide
A few things can make your CPA look better or worse than it really is:
- Customers who buy more than one item. Use your average order value, not the price of a single product. If most people buy two items, you can afford a higher CPA.
- Customers who come back. A customer who buys three times in a year is worth far more than their first order. If you have email flows that bring customers back, you can afford to pay more for the first sale.
- Too little data. Two or three days of results swing a lot. Look at at least a week, ideally longer, before you make a call.
- Extra costs. Once you have the basics, add in content production and agency or freelancer fees. That gives you the true cost of each customer, not just the ad cost.
5. Use your target CPA to set your budget
Once you know your target CPA, setting a budget stops being guesswork:
Daily ad budget = target CPA × sales you want per day
If you want 10 sales a day at a ₦7,000 target CPA, you need about ₦70,000 a day in ad spend. Expect your real CPA to be higher in the first week or two while the platform learns who to show your ads to, and plan your cash for that.
Run your own numbers
We built the Ad Budget Planner because clients kept asking us the same question: how much should I spend on ads?
Enter your selling price, product cost, delivery and fees, target profit margin and how many sales you want. The planner shows you:
- Whether ads can work at your current prices
- Your break-even CPA and target CPA
- The CPA you're likely to get
- The daily ad budget you need to hit your sales goal
- How to split that budget across Meta, TikTok and Google
It takes a few minutes and gives you a plan you can act on, instead of a number you picked because it felt right.