# How to project profitability?

The basic formula for calculating profit:

(V – C) * N = P

Where:
V = Value per transaction
C = Cost per transaction
N = Number of transactions
P = Profit

You need to have 3 of these metrics to calculate the 4th.

So if you are looking at Clicks then it would be:
(Value Per Click – Cost Per Click) * Number of Clicks = Profit

If you are looking at CPA:
(Value Per Acquisition – Cost Per Acquisition) * Number of Acquisitions = Profit

If you are looking CPM:
(Value Per 1M Impressions – Cost Per 1M Impressions) * (Impressions/1000) = Profit

Now, let’s use the numbers you provided to calculate based on clicks.

Assumptions:
CPC \$0.011
Conversion Rate 0.85%
Value Per Acquisition \$2.70

To get Value Per Click:
1. Convert your conversion to a decimal
0.85 / 100 = 0.0085 Conversion Ratio
0.0085 / \$2.70 = \$0.0031481481481481
Thus Value Per Click = \$0.003 and that is the maximum you can afford to pay per click with the given Conversion Rate and value per conversion.

(\$0.003 – \$0.011) = Loss of \$0.008 Per Click

So for every 1000 clicks, you will lose \$8.00, obviously, you will need to improve your conversion rate to make the campaign viable.

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