Calculators

profit-maximizing advertising budget (square root model)

Find the profit-maximizing advertising budget with the square root model

Based on just the four inputs below, this calculator will use the square root model to find your profit maximizing advertising budget. Read this article to learn more about this model.

Before making significant changes to your ad spend, use careful testing to determine your true elasticity between advertising and sales. This is a highly simplified model for advertising returns to scale. Use this only as starting point.

INPUTS

Advertising Budget

Your ad spend for a recent period, excluding branded search.

$

Resulting Net Sales

The corresponding revenue after accounting for discounts and (partial) returns/refunds (so again, excluding branded search).

$

Cost of Goods Sold (%)

Your average CoGS expressed as a percentage of net sales.

%

Other Variable Expense (%)

Other variable selling expenses (such as packaging, fulfillment, payment processing, etc.), again, as a percentage of net sales.

%
OUTPUTS

Base Scenario

Sales (revenue)

$
0
0
%

Gross Margin

$
0
0
%

Ad spend

$
0
0
%

Other Variable Expense

$
0
0
%

Variable Operating Profit

$
0
0
%

Optimal Scenario

Sales (revenue)

-54%

$
0

-30%

0
%

Gross Margin

-54%

$
0

-30%

0
%

Ad spend

-54%

$
0

-30%

0
%

Other Variable Expense

-54%

$
0

-30%

0
%

Variable Operating Profit

-54%

$
0

-30%

0
%

$ Change in Operating Profit

-54%

$
0

% Change in Operating Profit

-54%

0
%

Optimal Advertising Spend

Change in ad spend vs. base: 0

$
0

Optimal ROAS

0
%
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