Solved: Average Ad Costs? (The Real Reason)

Hi there,

Thanks for reaching out! Happy to give you some initial thoughts and guidance. The question about the 'average cost' of advertising is one I hear a lot, but to be brutally honest, it's probably the wrong question to be asking. Focusing on a vague 'average' can lead you to either spend too little to get results, or panic when your costs are higher than some imaginary number, even if you're profitable.

The real question isn't "what does it cost?", but "what can I afford to pay to acquire a profitable customer?". Let's unpack that a bit.

We'll need to look at what you're actually paying for...

First, let's tackle your original question head-on. The cost of a "conversion" is completely different depending on what that conversion is and where in the world you're advertising. Getting someone to sign up for a newsletter (a simple lead) is far cheaper than getting them to buy a £500 product (a sale).

To give you a ballpark idea, based on hundreds of campaigns we've run, here are some very rough ranges. In developed countries like the UK or US, you're looking at a cost per click (CPC) somewhere between £0.50 and £1.50. From there, your website's conversion rate does the rest of the work.

• For Leads/Signups: If your landing page converts at a decent 10-30%, your Cost Per Lead (CPL) would be somewhere between £1.60 and £15.00. We’ve managed campaigns for childcare services where the CPL was around $10, which fits right in this range.
• For Sales/Purchases: eCommerce stores typically see lower conversion rates, maybe 2-5%. So your Cost Per Acquisition (CPA) for a sale could be anywhere from £10 to £75. A lot depends on your price point, which is why for sales, we often focus more on the Return On Ad Spend (ROAS). For instance, one campaign we ran for a women's apparel brand generated a 691% return, meaning for every £1 they spent, they made £6.91 back in revenue.

In developing countries, the clicks are much cheaper (£0.10-£0.50), but the quality of the traffic and conversion rates can be much lower, so it's not always a bargain. The main takeaway here is that there's a massive range. Anyone who gives you a single "average" number is either inexperienced or not being honest.

Here's a quick visualisation of how dramatically the objective changes the potential cost.

As you can see, your budget's "realism" depends entirely on your goal. A £1,000 budget could get you hundreds of leads, or it could get you just a dozen sales. This brings us to the most important point.

I'd say you need to calculate your Customer Lifetime Value (LTV)...

This is the metric that separates businesses that successfully scale with paid ads from those that burn through cash. The real question isn't "How low can my CPL go?" but "How high a CPL can I afford to acquire a truly great customer?" The answer is your Lifetime Value (LTV).

Calculating it is simpler than you think. You just need three numbers:

1. Average Revenue Per Account (ARPA): What's the average amount a customer pays you per month or per year?
2. Gross Margin %: What's your profit on that revenue after accounting for the cost of goods sold (COGS)? For a service business, this is often high (e.g., 80-90%). For physical products, it's lower.
3. Monthly Churn Rate: What percentage of your customers do you lose each month? (If you don't know this, take 1 divided by the average number of months a customer stays with you).

The formula is: LTV = (ARPA * Gross Margin %) / Monthly Churn Rate

Let's run an example. Say you run a SaaS company where customers pay £200/month, your gross margin is 80%, and you lose 5% of your customers each month. Your LTV would be (£200 * 0.80) / 0.05 = £3,200. This means each customer is worth £3,200 in gross margin to you over their lifetime. Knowing this number changes everything.

A healthy business model often aims for a 3:1 LTV to Customer Acquisition Cost (CAC) ratio. With an LTV of £3,200, you can afford to spend up to £1,066 to acquire a single customer and still have a fantastic business. Suddenly, worrying about a £50 lead cost seems silly, doesn't it? This principle of focusing on what you can afford to spend, and then optimising, is incredibly powerful. I remember one client, a medical job matching SaaS platform, who came to us with a user acquisition cost of £100. By understanding their business model and optimising their campaigns, we were able to reduce that cost all the way down to £7, dramatically improving their profitability.

Use the calculator below to get a feel for your own numbers. This is the first step to creating a realistic and profitable advertising budget.

You probably should define your target customer by their pain...

Once you know what a good customer is worth, you can stop chasing cheap clicks and start targeting valuable prospects. And this means you have to get much, much more specific than "small businesses" or "women aged 25-40". These demographic profiles are useless for creating ads that convert.

You need to define your Ideal Customer Profile (ICP) not by who they are, but by the nightmare that keeps them up at night. What is their specific, urgent, expensive problem?

• For a fractional CFO service, the nightmare isn't 'needing better bookkeeping'. It's 'being one bad month away from a payroll crisis while your competitors are confidently raising their next round'.
• For a B2B SaaS product, the nightmare isn't 'inefficient workflows'. It's 'the star engineer threatening to quit out of sheer frustration with broken internal tools'.

Your ICP isn't a person; it's a problem state. Once you know that problem inside and out, you can find these people. Where do they hang out online? What podcasts do they listen to? What industry newsletters do they actually read? This intelligence becomes the blueprint for your ad targeting. You're no longer just throwing things at the wall; you're performing precision strikes. This is how you find people worth that £1,066 CAC we calculated earlier.

You'll need an offer they can't ignore...

Now we get to the final, and most common, point of failure: the offer. All the perfect targeting and LTV calculations in the world won't matter if your Call to Action (CTA) is "Request a Demo".

"Request a Demo" is an arrogant, high-friction CTA. It asks a busy, important person to give up their time to be sold to. It's an instant turn-off. Your offer's only job is to deliver a moment of undeniable value—an "aha!" moment that makes the prospect sell themselves on your full solution.

You must solve a small, real problem for free to earn the right to solve the big one. This turns advertising from a cost centre into a value-delivery machine.

This is the main advice I have for you:

So, to bring this all together. Building a realistic budget and a campaign that actually works isn't about finding an "average cost". It's a strategic process. Here are my main recommendations for you to implement.

Putting all of these pieces together—the financial modeling, the deep customer research, the strategic offer creation, and the technical ad platform execution—is complex and takes a lot of work. This is where getting professional advice can make a huge differance. An expert can help you build this entire framework correctly from day one, avoiding costly mistakes and accelerating your path to profitable growth.

If you'd like to chat through your specific business goals and how this framework could apply to you, we offer a free, no-obligation initial consultation where we can give you some more tailored advice.

Hope this helps!

Regards,

Team @ Lukas Holschuh