ROAS and cost per lead: how to know if your advertising is making money

Two business owners compare their campaigns over coffee. The first says proudly: “My leads cost me half of what yours do”. The second smiles: “Maybe, but out of every ten of my leads four buy, and out of yours one does”.

Who has the better campaign? You cannot tell by looking at a single number. Cost per lead and ROAS are the two metrics that tell you whether your advertising is making money, and they only work together.

What is cost per lead?

It is what you pay on average for each contact your advertising generates. It is calculated like this:

Cost per lead = ad spend ÷ number of leads

If you invested 2,000,000 pesos and 100 contacts came in, each lead cost you 20,000 pesos. It is a useful metric to compare campaigns, but misleading on its own: a cheap lead that never buys is expensive.

What is ROAS?

It is return on ad spend: how much you sell for every unit you invest in ads.

ROAS = sales generated by the ads ÷ ad spend

The Google Ads help explains it with an example: a target ROAS of 500% means that for every dollar invested in ads you want to get five in sales.

Back to the coffee shop, with example numbers so the logic is clear:

	Business 1	Business 2
Ad spend	2.000.000	2.000.000
Leads	100	50
Cost per lead	20.000	40.000
Customers (close rate)	10 (10 %)	20 (40 %)
Average ticket	500.000	500.000
Sales	5.000.000	10.000.000
ROAS	250 %	500 %

The second one's leads cost twice as much and, even so, their campaign sells twice as much. Cost per lead says nothing without the close rate.

Watch out: the figures in the table are an illustrative example to understand the calculation, not real data from any business.

What is a good ROAS for my business?

The one that leaves a profit after paying for the product, the operation and the ads. That is why there is no magic number: a ROAS of 300% can be excellent for a high-margin service and a loss for a low-margin retailer. First calculate your break-even ROAS based on your margin.

How do I measure sales if I sell on WhatsApp?

By connecting your CRM to your ads. This is the problem of almost every business that sells through chat: the ad platform sees the click, but the sale happens later on WhatsApp. To close the loop:

1. Record the source of each lead in the CRM (campaign and ad).
2. Mark the sales in the CRM with their value.
3. Send those sales to the platform with Meta's Conversions API or as conversion values in Google Ads.
4. Measure key events on your website with GA4.

Common mistake: deciding your ads based on cost per click or cost per lead from the ads dashboard. Those numbers do not know how many customers bought. Without the sales data from the CRM, you are optimizing blind.

Once you have value data, Google Ads lets you use the target ROAS strategy so the system bids aiming for that return. And if you get many leads, lead scoring helps improve your close rate.

In short

Cost per lead tells you how much you pay for each contact; ROAS tells you how much you sell for every peso invested. Together, and with the real sales from your CRM, they answer the only question that matters: is this advertising making money? At the coffee shop, the one with the more expensive leads won. We measure and optimize your ads with sales data in our Meta and Google Ads service.