Solved: High vs. Low Ad Spend for Competitive Niche?

Hi there,

Thanks for reaching out! Happy to give you some initial thoughts on your question about ad spend. It’s a common one, especially when you're staring down the barrel of a really competative niche. Everyone thinks it’s a simple choice between going in big or starting small.

But tbh, you’re asking the wrong question. It's not about high spend vs. low spend. Pouring a huge budget into a broken strategy is just a very fast way to burn all your money. And a tiny budget, even on a good strategy, might not give the ad platforms enough data to learn. The real lever for success isn't the daily spend number you punch in; it’s about having the right foundations in place *before* you even think about scaling. It's about out-thinking your competition, not just out-spending them.

Let's unpack what actually matters.

You're asking about the engine, but you haven't built the car...

Thinking about high vs. low budget first is like arguing about whether to put premium fuel or regular fuel in a car that has no wheels. It completely misses the point. The fuel won't make a difference if the vehicle itself is fundamentally broken. In advertising, your 'vehicle' is your strategy, which is made up of three critical parts: your audience targeting, your offer, and your financial model (i.e., your business's unit economics).

In a competitive market, your rivals are already spending big. You won't win by just matching their spend. You'll win by being smarter. They are likely wasting a huge portion of their budget on ads that target the wrong people with a weak message. Your advantage comes from precision, not brute force. You need to be a sniper while they're using a shotgun.

Let's build your car, piece by piece. First, we need to know exactly who we're driving to.

We'll need to look at your ICP's Nightmare, Not their Demographics...

Forget the generic customer profile you've probably got. "UK-based companies in the tech sector with 100-500 employees" is utterly useless. It tells you nothing about their problems, their fears, or their ambitions. It leads to bland, generic ads that get ignored because they speak to no one.

To cut through the noise in a crowded market, you have to define your Ideal Customer Profile (ICP) by their *pain*. What is the specific, urgent, and expensive problem that keeps them awake at night? What's the career-threatening nightmare they are desperate to solve?

Your Head of Sales client isn't just a job title; he's a manager terrified of missing his quarterly target and having to explain it to the board. Your Head of HR isn't just a department head; she's overwhelmed by the admin of onboarding and terrified of a star new hire leaving within 3 months because the process was a shambles.

Your ICP isn't a person; it's a *problem state*. Once you've truly understood that nightmare, everythign else becomes easier. Your ad copy writes itself. Your targeting becomes laser-focused. You're no longer selling a "CRM platform"; you're selling "the end of pipeline anxiety for sales leaders."

So how do you find them? You map their pain to their behaviour. Where do they go to talk about this pain or look for solutions?

• Niche Communities: Are they in specific Slack channels, Facebook Groups ('SaaS Growth Hacks'), or subreddits?
• Influencers: Who do they follow on LinkedIn or Twitter for advice? People like Jason Lemkin or Dave Gerhardt?
• Media Consumption: What industry newsletters do they *actually* read (e.g., Stratechery)? What podcasts do they listen to on their commute (e.g., Acquired)?
• Software Stack: What other tools do they already pay for? If they use HubSpot, they care about marketing automation. If they use Salesforce, they're serious about sales process.

This intelligence is the blueprint for your targeting strategy. You stop targeting "job titles" and start targeting people who have demonstrated by their behaviour that they are living inside the nightmare you can solve. Do this work first, or you have absolutely no business spending a single pound on ads.

I'd say you need to do the maths: Can you even afford to compete?...

This is the part almost everyone skips, and it’s why they fail. The real question isn't "How low can my Cost Per Lead go?" but "How high a Cost Per Lead can I *afford* to acquire a great customer?" The answer lies in calculating your Customer Lifetime Value (LTV).

If you don't know what a customer is worth to you, you have no idea what you can safely spend to get one. You'll either be too timid and miss opportunities, or too reckless and go bankrupt. In a competitive niche, your competitors who *do* know their numbers will eat you for lunch. They can confidently spend £300 to acquire a lead because they know that lead will turn into a £10,000 customer.

Let's break it down simply:

• Average Revenue Per Account (ARPA): What's the average amount a customer pays you per month?
• Gross Margin %: What's your profit margin on that revenue after accounting for costs of goods sold (COGS) or service delivery? For SaaS, this is often very high (e.g., 80-90%). For services, it might be lower.
• Monthly Churn Rate %: What percentage of your customers do you lose each month? (If you lose 3 out of 100 customers, your churn is 3%).

The calculation is straightforward:

LTV = (ARPA * Gross Margin %) / Monthly Churn Rate

For example, if your ARPA is £400, your gross margin is 75%, and your monthly churn is 4%:

LTV = (£400 * 0.75) / 0.04
LTV = £300 / 0.04 = £7,500

This means, on average, each new customer you acquire is worth £7,500 in gross margin to your business over their entire lifetime. Now we have a number to work with!

A healthy business model aims for an LTV to Customer Acquisition Cost (CAC) ratio of at least 3:1. This means you have room for profit, operational costs, and reinvestment. With a £7,500 LTV, you can afford to spend up to £2,500 (i.e., £7,500 / 3) to acquire a single new customer.

This is the maths that unlocks aggressive, intelligent growth. Suddenly, a £200 lead from a perfectly targeted LinkedIn ad doesn't seem so expensive anymore. It looks like a bargain.

You probably should create an offer they can't refuse...

Now we get to the most common point of failure in all B2B advertising: the offer. I can tell you now, the "Request a Demo" button on your website is killing your campaigns. It is the most arrogant, high-friction, low-value Call to Action ever invented. It presumes your prospect, a busy decision-maker, wants to give up 30 minutes of their day to be sold to. They don't. It immediately frames you as just another vendor begging for their time.

In a competative market, your offer needs to do the selling *for you*. Its only job is to deliver an "aha!" moment of undeniable value that makes the prospect sell themselves on your full solution. You have to solve a small, real problem for free to earn the right to solve their whole problem for a price.

What does a good offer look like?

• For SaaS: The gold standard is a free trial or a freemium plan. No credit card required. Let them actually *use* the product and feel the transformation. I remember one campaign for a B2B software client where we generated 1,535 trials using this approach on Meta ads. Another software client got over 5,000 trials at just $7 each. When the product proves its own value, the sale is easy.
• For Agencies/Consultants: You must package your expertise into a valuable asset. This could be a free, automated audit (like an SEO audit showing top 3 keyword opportunities). For us, it's a free 20-minute strategy call where we audit failing ad accounts. We give away real value and demonstrate our expertise, which builds trust far more than a sales pitch ever could.
• For High-Ticket Services: Create a 'foot-in-the-door' offer. A one-off, fixed-price workshop or a diagnostic report. It's a low-risk way for a client to experience working with you before committing to a huge project.

Your ad needs to lead with this value. You don't sell "Fractional CFO Services"; you sell a good night's sleep. Your ad should say something like: "Are your cash flow projections just a guess? Get a free, one-page financial health report that shows your 3 biggest risks in the next 90 days." See the difference? You're giving, not asking.

You'll need to pay the platforms to find customers, not just people...

Here’s an uncomfortable truth about platforms like Meta (Facebook/Instagram). When you set your campaign objective to "Brand Awareness" or "Reach," you are giving the algorithm a very specific, and very stupid, command: "Find me the largest number of people for the absolute lowest price."

The algorithm, being a ruthlessly efficient machine, does exactly what you asked. It goes out and finds all the users in your target audience who are least likely to click, least likely to engage, and are guaranteed to never, ever buy anything. Why? Because their attention is cheap. No other advertiser wants them, so the platform can sell you their impressions for pennies.

You are literally paying the world's most powerful advertising AI to find you the *worst possible audience* for your product.

In a competitive market, awareness is a luxury you can't afford. And anyway, it's a lie. The best form of brand awareness is a customer who is so happy with your product they tell their friends about it. That only happens through conversion.

From day one, your campaigns should be optimised for a conversion goal that matters to your business. That means "Leads", "Sales", "Registrations", or whatever action signifies a potential customer. By doing this, you are training the algorithm. You're telling it, "Go find me more people who look and act like the ones who just filled out my lead form." This is how you leverage the platform's power, rather than fighting against it.

One campaign we worked on for a medical job matching SaaS had an initial CPA of £100. By switching to the right conversion objectives and refining the targeting, we reduced it to just £7. That wasn't about budget; it was about giving the algorithm the right instructions.

So... What should your budget be?

Alright, now that we've built the car, we can finally talk about the fuel. With a clear ICP, a strong offer, and the right campaign objective, we can answer your original question: high or low budget?

The answer is: you start with a budget that is **low, but statistically significant.**

Your goal in the beginning isn't to get hundreds of leads. Your goal is to get *data*. You're running an experiment to validate your assumptions about your audience and your message. You need to spend enough for the algorithm to have a fair shot at finding converters, but not so much that a failed test will sink you.

Here’s a practical rule of thumb for setting a test budget for a new adset:

Your daily ad set budget should be at least 1x to 2x your target Cost Per Acquisition (CPA).

From the LTV exercise, you know your *affordable* CAC. Let's say it's £2,500. Your *target* CPA for a lead might be much lower, say £150. In this case, you should set the daily budget for that ad set to somewhere between £150 and £300. This gives the algorithm enough spend to learn what a £150 lead looks like and find them consistently. If you set the budget to £20 a day, the platform might never get enough data to properly optimise, and you'll conclude the adset "didn't work" when really it was just starved of data.

I've built a simple calculator below to help you figure out a sensible starting point for your tests.

This is the main advice I have for you:

To put it all together, here is the step-by-step process I would recommend you follow. This approach prioritises learning and de-risking your investment, which is the only way to win in a tough market.

As you can see, the actual budget is the last piece of the puzzle, not the first. Getting these other elements right is what separates the campaigns that generate a 691% return (like one we ran for a women's apparel eCommerce client) from the ones that burn cash and leave you frustrated.

This process takes work and discipline. It's tempting to skip steps and just throw money at the problem, especially when you're under pressure. But in a competitive niche, that's a receipe for disaster. A methodical, strategic approach is your only real competitive advantage.

If you'd like an expert eye on this process or want to walk through how these principles would apply specifically to your business, we offer a completely free, no-obligation 20-minute strategy session. We can look at your specific situation and give you some actionable advice to get you started on the right foot.

Regards,

Team @ Lukas Holschuh