Ecom Profitability Unleashed: Break Even ROAS For B2B Facebook Ads

Reading Time: 6 minutes

Running B2B Facebook ads for your business can be a game-changer. It’s a surefire way to boost sales, increase product visibility, and expand your organic reach. But, here’s the kicker: you need to master the art of Break Even ROAS (Return on Ad Spend) to ensure your advertising endeavors are hitting the mark. And here’s the good news – these calculations aren’t limited to just Facebook; they’re equally relevant for other PPC platforms like Amazon.

So, let’s take a delightful stroll through the world of Facebook Break Even ROAS, where we’ll unravel its magic and also highlight its applicability to other advertising platforms.

Bid farewell to uncertainty and say hello to well-informed decisions with this comprehensive guide on Break Even ROAS!

Here’s a sneak peek at what we’re about to explore together:

1. What is ROAS & How to Calculate It for B2B Facebook Ads. It all starts with understanding ROAS.
2. A Close Encounter: ACoS vs. ROAS: Unravelling the intricacies of ad cost and revenue.
3. The Perks of Crunching Numbers: Unveiling the benefits of Break Even ROAS calculations.
4. Connecting the Dots: The symbiotic relationship between Customer Lifetime Value (CLV) and Break Even ROAS.
5. Putting It All Into Action: Practical strategies to implement Break Even ROAS on Facebook.
6. Extending the Concept to Other PPC Platforms: Taking these concepts and using for other ad platforms.

Okay, let’s get started!

What is ROAS & How to Calculate It for B2B Facebook Ads

ROAS, or Return on Advertising Spend, is the golden metric that reveals how much revenue your ad campaigns generate for every pound spent. It’s your trusty guide for assessing your ad campaign’s performance and fine-tuning your strategies for better profitability.

Calculating ROAS for Facebook is as easy as pie. Just divide the total revenue attributed to your ads by your total ad spend:

ROAS = Total ad-attributed sales / Total ad spend

For instance, if your February ad campaigns raked in £20,000 in revenue, and your monthly ad spend was £5,000, your ROAS calculation would look like this:

ROAS = (£20,000 / £5,000) = 4

In simpler terms, you’re making £4 for every £1 spent on ads. And, if you prefer a more effortless approach, Facebook’s advertising tools can do the number crunching for you.

Deciphering the Break Even ROAS for B2B Facebook Ads

Break Even ROAS is the secret sauce for evaluating the true profitability of your Facebook ad campaigns. While ROAS gives you the revenue versus ad spend picture, Break Even ROAS adds profit margins to the mix, including those sneaky costs of goods sold (COGS) and platform fees.

To get your Break Even ROAS mojo working, start by figuring out the profit before advertising for each product:

Profit before advertising = (Selling Price – COGS)

For instance, if your average selling price is £50, and your COGS stands at £20, your profit before advertising would be £50 – £20 = £30.

Now, if your advertising costs for a single sale are £10, you’re looking at a £20 net profit. But, if those advertising costs balloon to £30 for a single sale, your profit dwindles to £0 – that’s your break-even point.

From this magical break-even point, you can whip up the Break Even ROAS using this formula:

Break-even ROAS = (Product sale price / Break-even point)

In the example above, the Break Even ROAS would be (£50 / £30) = 1.67. So, you need to generate more than £1.67 in revenue for every pound spent on advertising to dance in the realm of profitable ads.

A Close Encounter: ACoS vs. ROAS

ROAS and ACoS (Advertising Cost of Sale) are like the dynamic duo of ad metrics. While ROAS measures how much you earn for every ad pound spent, ACoS calculates the advertising cost for each pound of revenue in ad sales.

Monitoring both ACoS and ROAS gives you the full picture of your advertising performance. For instance, if you splash out £100 on ads and reel in £500 in revenue, your ACoS is (£100 / £500) x 100 = 20%, and your ROAS is (£500 / £100) = 5.

By keeping tabs on these metrics, you can fine-tune your advertising strategy for maximum efficiency and profitability.

The Perks of Crunching Numbers: Advantages of Calculating Break Even ROAS

So, why bother with Break Even ROAS calculations? Well, there are plenty of perks:

• Spotting Profitable Campaigns: A Break Even ROAS of 2, for instance, means your ad campaign is a cash cow if your actual ROAS exceeds that. You can pump more budget into these campaigns to boost conversions.
• Rescuing Underperformers: When your ROAS matches the Break Even ROAS, you can tinker with bids or trim COGS to enhance profitability.
• Steering Clear of Losses: If your actual ROAS dips below the Break Even ROAS, you’re bleeding money. Put a stop to the financial haemorrhage by pausing or optimizing the campaign.
• Building Brand Awareness: Running campaigns with a ROAS lower than the Break Even ROAS can amp up product visibility and brand awareness.
• Leveraging CLV: Don’t forget about Customer Lifetime Value (CLV) when calculating ROAS. It unlocks the potential of repeat purchases and long-term customer value.

Connecting the Dots: The Relationship Between CLV and Break Even ROAS

Customer Lifetime Value (CLV) is your ticket to understanding the total value a customer brings to your business throughout their relationship with your brand. By factoring in CLV, you can supercharge your advertising budget and strategies for long-term growth.

Here’s the twist: a seemingly decent ROAS of 2 can skyrocket to 10 when you toss CLV from repeat purchases into the mix.

To get the CLV-adjusted Break Even ROAS, dust off this formula:

CLV = Average order value x Orders x Retention period

Then, divide your CLV by your total ad spend to unveil the CLV-adjusted Break Even ROAS:

CLV-adjusted Break Even ROAS = CLV / Total ad spend

This savvy approach ensures your advertising budget is wisely distributed for the long-term growth of your business.

Putting It All Into Action: Strategies for Implementing Break Even ROAS on Facebook

Now that you’re armed with the knowledge of Break Even ROAS, it’s time to put it to work on Facebook. Here are some practical strategies to get you started:

• Segmentation and Targeting: Slice and dice your Facebook ad campaigns based on demographics, interests, or behaviors. Tailoring your messages to different audiences can turbocharge your ROAS.
• Ad Creative Testing: Keep experimenting with various ad creatives, copy, and visuals. Discover what resonates best with your audience, and watch your conversion rates – and ROAS – soar.
• Budget Allocation: Allocate your budget strategically across campaigns and ad sets. If certain campaigns consistently outperform your Break Even ROAS, steer more budget in that direction for maximum returns.
• Ad Scheduling: Keep an eye on when your target audience is most active on Facebook. Adjust your ad scheduling accordingly to ensure your ads hit the bullseye during peak engagement times, giving your ROAS a boost.
• Conversion Tracking: Deploy Facebook Pixel or other conversion tracking tools to gauge your ads’ impact on user actions, such as purchases or sign-ups. This invaluable data empowers you to fine-tune your campaigns.

Extending the Concept to Other PPC Platforms

While our focus has been on Facebook, it’s essential to note that Break Even ROAS isn’t limited to just one platform. The concept is just as valid for other PPC platforms, including Amazon. Here’s how you can apply the same principles to Amazon advertising:

• Understanding Amazon Break Even ROAS: Amazon sellers can harness the power of Break Even ROAS by following the same formula: Break-even ROAS = (Product sale price / Break-even point).
• Profit Margin Consideration: Just like with Facebook, on Amazon, you must factor in profit margins when calculating Break Even ROAS. Account for all costs, such as Amazon fees, fulfillment, and advertising spend, to determine the true profitability of your campaigns.
• Keyword Optimization: Optimize your Amazon PPC campaigns by strategically targeting high-converting keywords and placing bids wisely. Regularly review your campaigns to ensure they align with your Break Even ROAS objectives.
• Product Prioritization: Prioritize your products based on their profitability and Break Even ROAS. Allocate more advertising budget to products that show the potential to meet or exceed the Break Even ROAS threshold.
• Campaign Scaling: If you discover Amazon campaigns consistently outperforming your Break Even ROAS, consider scaling those campaigns to maximize profits and market share.

Leveraging Advanced Tools and Automation

To excel in managing Break Even ROAS strategies on Facebook, Amazon, or any other PPC platform, consider harnessing advanced tools and automation:

• Bid Management Software: Embrace bid management platforms that can autonomously tweak your bids based on your desired ROAS targets. These tools streamline your advertising spend optimization.
• Data Analytics: Implement data analytics tools to unearth deeper insights into customer behavior, trends, and the impact of your ad campaigns. Data-driven decision-making is the cornerstone of achieving and surpassing your Break Even ROAS goals.
• Machine Learning and AI: Dive into machine learning and AI-powered solutions that predict customer behavior, optimize ad targeting, and adapt your campaigns in real-time to secure the best ROAS outcomes.

Staying Informed and Adapting

In the ever-evolving realm of digital advertising, algorithms, user behavior, and competition are in constant flux. To stay ahead of the game, stay informed about industry trends, platform updates, and new advertising features that can supercharge your Break Even ROAS strategies.

Keep in mind that Break Even ROAS isn’t a static metric. Periodically review and tweak your goals in response to shifting market conditions and evolving business objectives.

In conclusion, Break Even ROAS is your trusty sidekick for transforming your advertising campaigns, whether you’re on Facebook, Amazon, or any other PPC platform. By mastering its principles, embracing effective strategies, and wielding advanced tools, you can optimize your ad spend, boost profitability, and conquer your business goals. Whether you’re targeting Facebook aficionados or Amazon enthusiasts, Break Even ROAS is your guiding star to success.