Is an Amazon Agency Worth It? How to Work Out the ROI With TACoS
David BalanCo-founder, Horison Marketing3 min read
Short version: an Amazon agency is worth it when the extra profit it creates is bigger than its fee. You can test that before you sign, using two numbers from your own account: your margin before advertising and your TACoS.
The two numbers you need
- Margin before ads: what you keep from each sale after product cost, Amazon fees, shipping and VAT, before any advertising. This is also your break-even ACoS. Work it out with our break-even ACoS calculator.
- TACoS: ad spend divided by total sales, ads and organic together. Work it out with our TACoS calculator.
Your margin after ads is simply margin before ads minus TACoS. That is the share of each extra pound of sales you actually keep.
The break-even formula
Extra monthly sales needed = agency fee ÷ (margin before ads − TACoS)
If the agency can grow sales by more than that, at the same TACoS, it pays for itself. Anything it saves by lowering TACoS is a bonus on top.
A worked example
A brand sells £50,000 a month on Amazon. Its margin before ads is 30% and it spends £8,000 a month on ads, so its TACoS is 16%.
| Before | After six months | |
|---|---|---|
| Monthly sales | £50,000 | £65,000 |
| Ad spend | £8,000 | £8,450 |
| TACoS | 16% | 13% |
| Profit before ads (30%) | £15,000 | £19,500 |
| Profit after ads | £7,000 | £11,050 |
Profit after ads rose by £4,050 a month. Any agency fee below that leaves the brand better off; a fee of £2,000 would leave about £2,050 a month of extra profit.
Check it with the formula. At the starting TACoS of 16%, margin after ads is 30% − 16% = 14%, so a £2,000 fee needs £2,000 ÷ 0.14 ≈ £14,300 of extra monthly sales to break even. The example grew by £15,000, and the lower TACoS added more on top.
Where the extra profit comes from
- Less wasted ad spend. Keywords that spend without selling are cut, usually in the first weeks.
- Better conversion. Stronger listings, images and A+ content turn more clicks into sales, which lowers ACoS on every campaign.
- More organic sales. As rank improves, more sales arrive without an ad click, so TACoS falls while sales grow.
- Fewer losses. Suppressed listings, stock-outs and account-health problems cost sales every day they go unfixed.
- Your time back. Hours you no longer spend on campaigns and Seller Support cases have a value too.
When an agency isn’t worth it (yet)
- Sales are too small. If the extra sales needed are a big multiple of your current revenue, the fee can’t pay back.
- Margins are too thin. If margin before ads is close to your TACoS, there is little room to advertise profitably. Fix price or cost first.
- The problem isn’t on Amazon. Stock, product quality or reviews driven by the product itself won’t be solved by better ads.
- You won’t share access or costs. An agency can’t set profitable targets without your margins.
Questions to ask an agency about ROI
- How will you set ACoS and TACoS targets for my products?
- What do you expect in months 1, 3 and 6, and how will we measure it?
- Can you show case studies with TACoS, not just revenue growth?
- What happens if the targets aren’t met?
How Horison measures it
At Horison, targets start from your margin before ads, and every monthly review shows total sales, TACoS and organic versus ad sales next to the targets we agreed. Across 140 clients in the past twelve months, average revenue growth was 86% year on year at a 12.6% average TACoS; one seasonal brand grew 105% year on year at under 10% TACoS.
Want us to run these numbers on your account? Book a free discovery call. For the cost side, read how much an Amazon agency costs, and before you sign, check our contract red flags.
Frequently Asked Questions
Is an Amazon agency worth the money?
It is worth it when the extra profit it creates is bigger than its fee. Divide the monthly fee by your margin after advertising (margin before ads minus TACoS) to get the extra monthly sales needed to break even. If that growth, plus any TACoS saving, looks realistic for your account, an agency is likely to pay for itself.
What is TACoS on Amazon?
TACoS (total advertising cost of sale) is your ad spend divided by your total sales, including organic sales. It shows how much advertising it takes to generate all of your revenue, so a falling TACoS while sales grow means ads are building organic rank.
What is a good TACoS on Amazon?
It depends on margin and stage. Many established brands aim for roughly 8–15%, while launches run higher for a while. What matters most is the trend, and that TACoS stays well below your margin before advertising. Across 140 Horison clients, average TACoS was 12.6%.
When is an Amazon agency not worth it?
When sales are too small for any realistic growth to cover the fee, when margins are too thin to advertise profitably, or when the real problem is outside Amazon, such as stock, product quality or price. Fix those first.
How long should I give an Amazon agency to show ROI?
Expect lower wasted spend in the first month and better conversion within two to three months. Judge total sales and TACoS over three to six months, compared with the same period last year.
David Balan is co-founder of Horison Marketing, a full-service Amazon agency that has managed over $1B in lifetime Amazon revenue for brands in the UK, EU and US.
