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- How do I know whether my ads pay?
Reading your P&L Answer 16 of 26 Updated
How do I know whether my ads pay?
Hold three ratios against the floors your own margins set: MER against break-even MER, POAS against 1,00, and blended CAC against what a first order leaves. All three sit on Insights, Marketing, for any range you pick, and all are blended: every euro of ad spend set against your own books, with no guess at which ad made which sale.
MER is net revenue divided by Marketing Costs, line 27 of the P&L. On its own it says little, so the Profit on ad spend card puts your break-even MER beside it: net revenue divided by CM2, what orders leave after goods, logistics and payment fees. Below that MER the ads cost more than the orders leave behind, and the gap above it is the room a bigger budget would spend. It comes from your own margin, so it moves when your costs or your product mix do.
POAS is CM2 divided by Marketing Costs: the margin earned per euro of ads. Break-even is exactly 1,00, a euro of ads coming back as a euro of margin, and the chart marks each point that falls below it. Above 1,00 the ads add to CM3; below it they eat into it. To cover your fixed costs as well, POAS has to clear 1,00 by enough to pay for them, which CM3 and EBITDA on the P&L show.
Blended CAC is Marketing Costs divided by the new customers won in the range, whichever channel brought them. Judge it against a first order's own margin: Insights, Customers sets the average first order's CM2 beside it, and the LTV tab draws it as the line a customer's contribution has to cross. A CAC above the first order's CM2 means you are buying customers at a loss and counting on them to come back.
nouz does not model attribution, so it claims no profit per platform. To judge one platform in its own terms, hold its reported ROAS against the Breakeven ROAS that Insights, Products works out per product. Spend that no platform reports, such as an influencer, belongs in Marketing spend on the Overhead page, or every ratio here looks better than it is.
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More in Reading your P&L
All 26 questions- 14 What is on each Insights tab?
- 15 How does the product profitability view work?
- 16 How do I know whether my ads pay? You are reading this
- 17 What do repeat purchase, order cadence and purchase journeys show?
- 18 How do I read the LTV tab?
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