How to calculate cost per acquisition
CPA is the total cost of conversions divided by the number of conversions. Google Ads calculates average CPA that way[1] and shows it as “Cost / conv.”: total cost divided by the Conversions column.[2]
On a $90 order, that CPA eats 33.3% of revenue, a ROAS of 3x. Whether that is good depends on margin, which is the next section.
Break-even and target CPA
Break-even CPA is the contribution each sale leaves before advertising: order value × gross (or contribution) margin. Contribution margin is the amount by which price exceeds variable cost per unit.[5] Spend more than that per sale and each one loses money; spend less and the difference is profit.
- Break-even CPA$60.00
- Target CPA (10% profit)$48.00
- Equivalent target ROAS2.5x
Google’s Target CPA bidding asks for exactly this number: the average amount you would like to pay for a conversion.[3] Setting it from margin rather than from last month’s CPA keeps automated bidding from buying unprofitable sales. The break-even ROAS calculator works the margin out from price, product cost, shipping and fees.
CPA from cost per click and conversion rate
CPA also equals CPC ÷ conversion rate, which shows the two levers you can pull.
| CPC | 1% | 2% | 4% | 8% |
|---|---|---|---|---|
| $0.50 | $50.00 | $25.00 | $12.50 | $6.25 |
| $1.00 | $100 | $50.00 | $25.00 | $12.50 |
| $2.00 | $200 | $100 | $50.00 | $25.00 |
| $4.00 | $400 | $200 | $100 | $50.00 |
Microsoft Advertising divides conversions by clicks,[4] which matches this table; Google divides by interactions, which are clicks for most search ads. Raise conversion rate with the conversion rate calculator and cut click cost with the CPC calculator.
CPA mistakes
- Counting every conversion action. If newsletter sign-ups and purchases both count as conversions, CPA blends a cheap and an expensive action into one meaningless figure.
- Ignoring repeat purchases. A first-order CPA above break-even can still pay if customers come back. Compare it with lifetime value in the customer lifetime value calculator.
- Using revenue instead of margin. A $120 order does not give you $120 to spend on acquiring it.
Not affiliated with Google or Microsoft. Platform names are trademarks of their owners and appear only to identify whose documentation we cite.
Frequently asked questions
How do you calculate CPA?
Ad cost ÷ conversions. $1,200 ÷ 40 = $30.00.
What is a good CPA?
Any CPA below your break-even CPA (order value × margin), and ideally below your target CPA after the profit you want to keep.
How do I calculate target CPA?
Order value × (gross margin − profit share you want). $120 × (50% − 10%) = $48.
Is CPA the same as CAC?
No. CPA is ad cost per conversion of any kind; CAC is all sales and marketing cost per new customer. See the CAC calculator.
Sources
- Average CPA: Definition
- Understand your conversion tracking data (Conv. value / cost, Cost / conv.)
- About Target CPA bidding
- Report attributes and performance statistics (CTR, average CPC, conversion rate, ROAS)
- Principles of Accounting, Volume 2, 3.1 Contribution margin per unit and contribution margin ratio