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How much more or how much less should you be spending on advertising?

The square root "rule" says that sales increases with the square root of advertising. So if you'd double your advertising spend (2x) your sales would increase with √2 (1.41). Using that rule and your inputs on the left, this calculator will calculate the profit-maximizing advertising spend.

Of course this model isn't correct, but it has it strengths and can help you get a first feel of the direction to test. You should always test carefully before making significant changes to your ad spend. Read all about it in this corresponding article on LinkedIn.

Enter your ad spend for a recent period, excluding branded search.
Enter the corresponding revenue after accounting for discounts and (partial) returns/refunds. Again, excluding sales from branded search.
Enter your average cost of goods sold, expressed as a percentage of net sales.
Enter your other variable selling expenses (such as packaging, fulfillment, payment processing, shipping, commissions), again as a percentage of net sales.

Optimal Advertising Budget

Change in Advertising
Variable Operating Profit
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Optimal Scenario Breakdown
Sales
Gross Margin
Marketing Cost
Other Variable Expenses

Variable Operating Profit

Variable Operating Profit

Breakdown per scenario

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