Why Your Target CPA is Wrong (And How to Fix It)

Setting a Target CPA (Cost Per Acquisition) in Google Ads is a balancing act. Set it too high, and you burn cash. Set it too low, and your campaigns suffocate.

The problem is that most advertisers set their CPA target based on "gut feel" or what they want to pay, rather than what the math says they can pay.

The "Race to the Bottom" Trap

I often hear clients say: "I want to get my CPA as low as possible."

While that sounds logical, it's often a trap. If your competitor can afford to pay £50 to acquire a customer, and you are trying to only pay £20, they will win every auction. They will get the best traffic, the highest intent clicks, and the most volume.

Your goal shouldn't be the lowest CPA. It should be the highest CPA you can afford while still hitting your profit goals. This allows you to maximize volume and dominate your market.

How to Calculate Your True Target CPA

To find your "Max CPA" (Break-Even CPA), you simply subtract your variable costs from your selling price.

Once you have your Max CPA, you can decide how much profit you want to keep per order.

Target CPA = Max CPA - Desired Profit

For example:

• Selling Price: £100
• Total Costs (COGS + Shipping + Fees): £60
• Max CPA (Break-Even): £40

If you want to make £10 profit on every order, your Target CPA is £30.

Don't Forget LTV

The calculation above is for the first order. If you know your customers come back and buy again (Customer Lifetime Value), you can afford to pay even more for that first acquisition.

Some aggressive brands will even set their Target CPA higher than their first-order profit, knowing they will make it back on the second or third purchase.