Solved: Good ROAS in Reading? (Data Inside)

Hi there,

Thanks for reaching out.

Happy to give you some initial thoughts on your question about ROAS in Reading. Honestly, asking "what's a good ROAS" is a bit like asking "how long is a piece of string?". The answer is always... it depends. It's probably the most common question I get, but it's also the wrong one to be asking.

A 2x ROAS could be fantastic for a business with 90% profit margins, while a 10x ROAS could be a total disaster for one with 10% margins. What matters isn't a generic industry benchmark, especially not one tied to a specific town like Reading. What truly matters is whether your advertising is profitably acquiring customers that will make you money in the long run. The competition in Reading is a factor in your *costs*, but not in what makes a return *good* for your specific business.

So, instead of chasing an arbitrary number, we need to build a framework from the ground up based on your business's unique economics. Below I've outlined the process we use to answer this question properly. It's a bit more work, but it's the only way to know for sure if your ads are actually working for you.

You'll need to calculate your Customer Lifetime Value (LTV)...

This is the first and most critical step. Before you can know what a good return is, you need to know what a customer is actually worth to you over their entire relationship with your business, not just the first sale. Most businesses massively underestimate this, and as a result, they are way too conservative with their ad spend and get outbid by competitors who understand their numbers better.

The calculation isn't too complicated. You just need three pieces of information:

1. Average Revenue Per Account (ARPA): How much money does a typical customer bring in per month (or per year, just be consistent)?
2. Gross Margin %: What percentage of that revenue is actual profit after you've paid for the cost of goods sold (COGS) or the direct costs of delivering the service? Don't include marketing or overheads here, just the cost to deliver the thing you sell.
3. Monthly Churn Rate %: What percentage of your customers do you lose each month? If you lose 2 out of 100 customers a month, your churn rate is 2%.

The formula is: LTV = (ARPA * Gross Margin %) / Monthly Churn Rate

Let’s run an example. Imagine you're a local subscription box service based in Reading.

• Your box costs £50 a month (ARPA = £50).
• The products inside and the packaging cost you £20, so your gross margin is £30, or 60% (Gross Margin = 0.60).
• You find that, on average, you lose 5% of your subscribers each month (Churn = 0.05).

So, your LTV would be: (£50 * 0.60) / 0.05 = £30 / 0.05 = £600.

Every time you acquire a new customer, you can expect to make £600 in gross profit from them over their lifetime. That is the number you should be making decisions with, not the £30 profit from their first box. Suddenly, paying £100 to acquire that customer doesn't seem so bad, does it?

To make this easier, I've built a simple calculator for you below. Play around with your own numbers to see what your LTV is. You might be surprised.

I'd say you need to determine your target Customer Acquisition Cost (CAC)...

Right, so you've got your LTV. What now? Now we use it to figure out how much you can actually afford to spend to acquire a customer. This is your Customer Acquisition Cost, or CAC.

A healthy, sustainable business model for companies that advertise often aims for a LTV:CAC ratio of 3:1. This means for every £1 you spend on acquiring a customer, you get £3 back in lifetime gross profit. This gives you enough margin to cover your other business overheads (salaries, rent, software etc.) and still make a healthy profit.

Using our £600 LTV from the example above, a 3:1 ratio means your target CAC is £600 / 3 = £200.

This is your new North Star. Your entire advertising strategy should now be built around acquiring customers for £200 or less. This is so much more powerful than a vague "4x ROAS" goal. A 4x ROAS on the first £50 purchase is a £12.50 CAC (£50 revenue / 4). That's a huge difference from the £200 CAC you can actually afford. You're leaving a ton of growth on the table by being too timid.

This also tells you how much you can afford to pay for leads. If your sales process converts 1 in 10 qualified leads into a paying customer (a 10% conversion rate), you can afford to pay up to £20 per lead (£200 CAC / 10 leads). For instance, I recall a campaign we're currently running for an HVAC company where they are seeing costs of around $60 per lead. This might sound expensive on its own, but it becomes a profitable investment when you understand that the lifetime value of a single customer in that industry can be in the thousands. It's all about the maths.

Here's another calculator to help you connect your LTV to a target CAC and Cost Per Lead (CPL).

We'll need to look at your Ideal Customer Profile (ICP)...

So we've got the maths sorted. But numbers are useless if you're showing your ads to the wrong people. This is where most advertising campaigns, especially local ones, fall apart. Targeting "everyone in Reading" is a brilliant way to burn money. You need to get ridiculously specific.

And I don't mean specific in terms of demographics like "males, 30-50, living in Caversham". That's surface-level stuff that tells you nothing. You need to define your customer by their nightmare. What is the specific, urgent, expensive problem they are facing right now that you are uniquely positioned to solve? Your ideal customer isn't a person; it's a problem state.

Let's take a B2B example. Say you're an IT support company in Theale.

• Weak ICP (Demographic): "Small businesses with 10-50 employees in the Thames Valley." Your ads will be generic and ignorable. "Reliable IT support for Reading businesses." Yawn.
• Strong ICP (Pain-Based): "The non-technical founder of a 20-person recruitment agency in Green Park who just got hit with a phishing attack, is terrified of a data breach, and whose current 'IT guy' is her nephew who only answers his phone half the time."

See the difference? The second one is a nightmare. It has emotion. It has urgency. Now you can write an ad that speaks directly to that fear: "Worried your client data isn't secure? A single breach could ruin your reputation. We specialise in making recruitment agencies in Reading fully compliant and secure. Get a free security audit." That ad will cut through the noise because it's hyper-relevant to someone in that specific moment of pain.

This is the real work of targeting. It's not about picking interests on Facebook; it's about deep customer empathy. Before you spend another pound on ads, you have to do this work. Who are you *really* selling to? What keeps them up at night?

You probably should rethink your offer...

This brings us to the final piece of the puzzle, and it's where most businesses go wrong. You can have your LTV:CAC maths perfect and your targeting dialled in, but if your offer is weak, your campaigns will fail. And the worst, most arrogant offer in all of advertising is "Request a Quote" or "Contact Us for a Demo".

Why is it so bad? Because it's high-friction and low-value. You are asking your prospect to do all the work—fill out a form, wait for a call, sit through a sales pitch—with no guarantee of getting any value in return. It instantly positions you as a commodity, just another vendor begging for their time.

Your offer's only job is to provide a moment of undeniable value. It must solve a small piece of their nightmare for free, to earn you the right to solve the whole thing. It needs to give them an "aha!" moment that makes them sell themselves on your full solution.

If you're a service business, you must productise your expertise into a valuable, free asset.

• An accountant in Reading shouldn't say "Free Consultation". They should offer a "Free '5 Common Tax Mistakes Reading Businesses Make' Audit".
• A marketing agency shouldn't say "Get a Quote". They should offer a "Free Automated SEO Report Showing Your Top 3 Keyword Opportunities". I remember we worked with a home cleaning company who got leads for £5 a pop by offering a free, instant online estimate instead of a 'call for a quote'. The value was immediate.
• An electrician shouldn't say "Call Us". They should offer a "Free 10-Point Home Electrical Safety Check".

This isn't just about being nice; it's smart business. You are de-risking the first step for the customer. You are demonstrating your expertise, not just claiming it. This generates much higher quality leads because you're attracting people with the actual problem your free tool solves, and you're building trust from the very first interaction. You're not generating cold leads for a sales team to chase; you are creating educated, qualified prospects who are already convinced of your value.

Fixing your offer is often the single highest-leverage thing you can do to improve your ad performance, far more than tweaking a headline or a button colour.

This is the main advice I have for you:

So, to bring it all together, forget about finding a 'good ROAS' for Reading. Instead, build your own benchmark from the inside out. I've detailed my main recommendations for you in the table below. This is the framework that separates businesses that successfully scale with paid ads from those that just burn cash.

I know this is a lot to take in, and it's definately a different way of thinking about advertising than most people are used to. It's a strategic process, not just a tactical one of setting up a campaign and hoping for the best. Doing this work upfront is what allows you to scale your ad spend confidently and predictably, knowing that every pound you put in is building a more valuable business.

It can be tough to do this all on you're own, especially when you're busy running the actual business. Getting an expert, outside perspective can make a huge difference in identifying the core LTV drivers, defining that customer nightmare, and crafting an offer that actually converts.

If you'd like to chat through your specific situation in more detail, we offer a free, no-obligation initial consultation where we can take a look at your strategy and give you some actionable advice. It might be helpful to have a second pair of eyes on it.

Hope this helps!

Regards,

Team @ Lukas Holschuh