When you're running a small business you need to make every cent count in your advertising campaigns. Return on advertising spend is a metric that lets you gauge the effectiveness of your ad spending. Calculate your return on advertising spend and express it as a percentage to see if your advertising dollars are paying off.
Add up the total sales of the product or service being advertised, for the period during which you were conducting the ads. This will give you your gross revenues.
Add up your total advertising expense for the campaign.
Divide your revenues by your advertising expense to get the return on advertising spend expressed as a decimal. For example, with sales of $5,000 and an expense of $2,000 you would get a return on advertising spend of 2.5. This means that you earned $2.50 in revenue for every dollar you spent on advertising.
Multiply the decimal by 100 to express it as a percentage. The result will be your revenues expressed as a percentage of your advertising spending. For example, a decimal of 2.5 would become 250 percent, meaning revenues are equal to 250 percent of your advertising spending.
Warning
A percentage of less than 100 indicates that your gross revenues are less than your advertising spend.
