CoS Calculator – calculate cost of sales for SEA - Google Ads

CoS (cost of sales) states what percentage of net revenue was spent on advertising. The formula is CoS = ad spend ÷ net revenue × 100. A CoS of 15 % means 15 cents of every euro of revenue went into advertising.

The same metric goes by several names:

• KUR:

  • Kosten-Umsatz-Relation, the common term in German-speaking markets

• ACoS:

  • Advertising cost of sales, the variant used by Amazon Ads

• Advertising cost ratio:

  • The term often used in finance and controlling

Divide 100 by the CoS. A CoS of 20 % equals a ROAS of 5, a CoS of 25 % a ROAS of 4.

Conversely, CoS = 100 ÷ ROAS. Both metrics describe the same ratio from two directions: CoS shows what advertising costs, ROAS what it brings in. Google Ads needs ROAS as a percentage: a target CoS of 20 % equals a target ROAS of 500 %.

Any CoS below your margin before advertising costs is good – with enough headroom for fixed costs and profit. Your margin is the upper limit.

How to derive your target CoS:

• Set the upper limit:

  • At a 40 % contribution margin, the maximum CoS is 40 %. Above that, every order costs money.

• Subtract your profit goal:

  • If 10 % of revenue should remain, your target CoS is 30 %.

• Differentiate by product range:

  • High-margin products can carry a higher CoS than low-margin items.

Not necessarily. A very low CoS often shows that only brand searches and returning customers are being targeted. It looks efficient but gives away growth.

Typical warning signs:

• Falling revenue despite a good CoS:

  • The budget is too tight and reach is missing.

• Hardly any new customers:

  • Campaigns mainly reach buyers who would have purchased anyway.

• Competitors gaining market share:

  • Other stores bid on your most important search terms.

The goal is not the lowest CoS, but the highest profit after advertising costs.

Net revenue excluding VAT, ideally after returns. Only then can your CoS be compared with your margin.

How much wrong values shift CoS:

• Gross instead of net revenue:

  • With 19 % VAT, a true CoS of 15 % turns into 12.6 % on paper. The campaign looks better than it is.

• Returns not deducted:

  • With a 20 % return rate, a CoS of 15 % actually rises to 18.75 %.

Because CoS reads like any other cost ratio. Personnel cost ratio, rent ratio, advertising cost ratio: everything is a percentage of revenue and can be compared directly with the margin.

The advantages at a glance:

• Direct margin comparison:

  • A CoS of 25 % at a 40 % margin shows instantly that 15 percentage points remain for fixed costs and profit.

• Simple budget planning:

  • Revenue plan × target CoS gives the advertising budget.

• Clear direction:

  • The lower the CoS, the more efficient the advertising – no conversion needed.