Why ROAS Isn’t the Whole Story (Track CM3 Instead)

Before running an agency, I was the one hiring them. As a founder, a consultant, and a head of growth, I reviewed countless reports telling me ads were “working”.

The usual story? A healthy ROAS, maybe a solid CPA. But the one number no one gave me was the most important: actual profit.

And when you’re a founder, profit isn’t optional – it’s survival.

That gap between looking good on paper and running a profitable business is why we built Ballpoint. From day one, we decided to treat profitability as a core part of growth – not a footnote. That’s where CM3 comes in.

CM3: The Metric That Matters

CM3 gives you your contribution margin after all variable costs. It’s what’s left after:

**Revenue

• Cost of goods
• Fees and shipping
• Marketing spend**

No assumptions. No platform estimates. Just real profit per order.

We track CM3 across every ad, every channel, every test. Because otherwise, you’re flying blind.

Real Example: Calculating CM3 on a Product

Let’s say you’re selling a skincare serum online.
You ran a Facebook campaign and sold 500 units over the course of a week.

Step 1: Revenue

You sell each serum for £40.
You sold 500 units.

Total revenue = 500 x £40 = £20,000

---

Step 2: Cost of Goods Sold (COGS)

Each unit costs £9 to produce (including packaging).
COGS = 500 x £9 = £4,500

---

Step 3: Fees and Shipping

• Shipping cost per unit: £3.50
• Payment processing fees: 2.5% of total revenue
• Platform/warehouse fees: say, flat £400

Shipping = 500 x £3.50 = £1,750
Payment fees = 2.5% of £20,000 = £500
Other fees = £400

Total fees and shipping = £1,750 + £500 + £400 = £2,650

---

Step 4: Marketing Spend

Let’s say you spent £6,000 on ads to generate these 500 sales.

---

Final CM3 Calculation

CM3 = Revenue – COGS – Fees/Shipping – Marketing Spend
CM3 = £20,000 – £4,500 – £2,650 – £6,000 = £6,850

The Hidden Cost of “Winning” Ads

We worked with a brand recently that had scaled their “top performers” based on ROAS. But when we broke it down using CM3, it turned out those ads were generating sales at a loss.

Margins were tight. Shipping costs were high. The ROAS looked fine, but profitability was nowhere to be found. They weren’t scaling winners – they were scaling losses.

And they’re not alone. We’ve seen agencies hit their targets while clients quietly bleed cash.

ROAS Is a Signal – But It’s Not the Answer

ROAS still has its place. But optimising for it blindly leads to:

• Spending more to convert the same customer twice
• Prioritising low-hanging fruit over sustainable growth
• Ignoring cost structure and margin realities

When agencies chase ROAS without context, they often push bottom-funnel spend that cannibalises organic conversions – not adds to them.