There are three variables involved in determining the actual conversion rate and CPA requirements for ensuring profit from a PPC platform:
The average net margin is simply what percentage of a sale you actually retain as profit for your business. At a base level, most companies will determine their net margin as
Revenue – Cost of Goods Sold = Net Profit
Net Profit / Revenue = Net Margin
To get a truly profitable margin, you may consider subtracting more costs from your revenue. These costs could include payment processing fees, software service fees, and anything else that eats into your company’s bottom line.
The average order value is the average amount of revenue you get from a sale. You can typically find this value in your Google Analytics account within the “Ecommerce” reporting tab for your PPC account data.
The average CPC should be pulled from a significant sample size of your ad account data. For example, you may look at the last 30-60 days of your ad account stats and check the average CPC metric. Use this metric for your calculation.