The question I get from business owners most often is one you’ve probably asked yourself: How much should I spend on ads?
It’s a good question. But as the saying goes, how long is a piece of string?
Unfortunately, there’s no magic answer to what your advertising budget should be. If you do a Google search, you’re pretty likely to come across advice that tells you to spend some percentage of revenue on marketing. I’ve seen benchmarks ranging from 3% for established businesses, up to 30% for business in their “growth phase”.
These numbers aren’t wrong. They’re just not necessarily right for where your business is right now. Most of the benchmark figures you’ll find are based around large companies, who know exactly who their customer is, what they’re trying to achieve, and how much that needs to cost them.
When you’re getting started with ads, the most important number to have in mind is what you can afford to spend on testing and learning. Your first campaigns aren’t really about getting customers. They’re about getting information. How do audiences respond to your message, what makes people click, how your landing page needs to be optimised to actually get an enquiry. All this learning has real value, but looking at it in a vacuum, early results can feel underwhelming.
One of the biggest objections I hear from business owners is that they’ve “tried ads, and they didn’t work.” When pushed further on this, it turns out they’ve put $200 into some Facebook boosted posts, or that same $200 into Google, letting the platform come up with all their campaign settings, copy and keywords. Their conclusion? Ads don’t work for their business, because they didn’t see any meaningful results.
The real learning here should be that $200 isn’t ever going to be enough to learn anything useful.
On both Google and Meta, the optimal number of conversions before they can properly start optimising is between 30 and 50. If your average cost per click is $3 and your landing page converts at 5%, you’re paying $60 per lead. Getting 30 leads costs $1,800, and at that point you’ve just established your baseline.
As a rough guide for local service businesses:
That means a meaningful test will cost you somewhere in the region of $1,000 – $2,000. If that seems too high for your business, it’s probably better to wait until it is, rather than running a campaign that can’t generate enough data to be useful.
Rather than starting with a budget, and hoping it’s right, the best approach is to reverse engineer a budget from your actual business numbers.
Here’s how we do that:
That’s how we build out a budget with some logic applied. Not a guess. Not a benchmark someone pulled from a large company’s case study. A number tied directly to what you’re trying to achieve.
Not all ad spend is created equal. Where you put your money changes what you can expect to achieve, and how quickly.
Google search is great for reaching people who are actively looking for what you offer. Intent is high, conversion rates tend to be better, but this also results in higher costs per click. It’s typically the fastest way to get results, because you’re showing up at the moment someone who’s already decided they want your product or service decides to go looking. For most local service businesses, this is probably the place you want to start.
Meta (Facebook and Instagram) works differently. You’re reaching people who aren’t necessarily looking for you, which makes conversion harder. It’s generally better suited to building awareness, staying visible, and retargeting people who’ve already engaged with your business (visited your website or engaged with social content). The cost floor is lower, which can make it more accessible, but the pathway to results is typically longer.
The most common mistake we see is splitting an already small budget between both platforms. If you only have $1,500 a month to spend on advertising, dividing it gives you $750. Probably not enough to gain meaningful traction on either. Pick one, get it optimised, then expand when your numbers justify it.
When a business owner tells me they have $1,000 a month to spend on ads, they usually mean they have $1,000 to hand to the platform. That’s only a part of the equation though.
There’s also:
For a small business ensuring proper set up, then running a $1,500/month campaign, the all-in cost for the first 2 months is likely in the $4,000 – $6,000 range (depending on how much you do yourself). That’s not a reason to avoid it, just a realistic number to plan around.
Increasing your budget is something that you should do when you’re seeing good performance, not as a fix for poor performance. Doubling ad spend on a campaign that’s not working will just show you twice as fast how much is broken.
Signs you’re ready to scale:
Signs to fix things before spending more:
Before increasing your budget first ask: what’s the weakest point in my funnel right now? Fix that first.
If you want a process you can follow:
Start simple. Don’t overthink it. The data from the first month will be worth more to you than any benchmark you can find online.
For most businesses that struggle with paid ads, the budget isn’t the real problem.
The real problems are usually that their landing page isn’t converting, their offer isn’t compelling enough, their targeting is too broad, or their follow up process lets warm leads go cold. Putting money into fixing those issues will usually result in better results than just spending more on ads.
The right budget is whatever lets you get the information you need in order to make good decisions, improve what’s broken, then scale. That cycle is how good paid advertising works, when done consistently.
If you want help working through the numbers for your own business, we’re happy to do that in a free discovery call.
