Stop Wasting Money: The Ultimate Ad Budgeting Guide

One of the first questions I always get is "how much should I budget for ads?". And honestly, it's the wrong question. It’s like asking "how long is a piece of string?". The reason the pricing you see seems to vary wildly is because it does. A click in the UK for a competitive legal keyword on Google can be £50. A click on a Facebook ad targeting a developing country could be £0.10. Neither of these numbers tells you anything useful.

Trying to find a 'standard price' for ads is a waste of time and will lead you down a path of chasing cheap clicks that never convert. This is the number one reason businesses burn through cash and conclude "ads don't work". They work, but you're playing the wrong game. The real game isn't about minimising cost; it's about maximising profit. To do that, you need to stop thinking like a marketer worrying about Cost Per Click (CPC) and start thinking like a CFO who cares about one thing: Return on Investment.

This means you need to get comfortable with some basic maths. Before you spend a single pound on ads, you need to know exactly what a customer is worth to you. Once you know that, budgeting becomes a simple exercise in logic, not a wild guess.

Forget 'cheap leads', what's a customer actually worth to you?

The most important metric in your entire business isn't your ad spend, it's your Customer Lifetime Value (LTV). This tells you the total profit you can expect to make from an average customer over the entire time they stay with you. Once you know this number, everything else falls into place. You stop asking "is a £20 lead expensive?" and you start asking "if I pay £20 for this lead, will I make a profit?". Big difference.

I see so many businesses, especially B2B SaaS companies, get this wrong. They obsess over a £100 Cost Per Acquisition (CPA) without realising their LTV is £10,000. I remember one medical recruitment client who came to us with a £100 CPA they thought was extortionate. We looked at their numbers, optimised their targeting, and got it down to £7. But the real win wasn't just cutting the cost; it was showing them that even at £100, they were printing money because each user was worth thousands over their lifetime. You can find out more on how to approach this in our ultimate guide on B2B advertising.

Calculating your LTV isn't as hard as it sounds. You just need three bits of info:

• Average Revenue Per Account (ARPA): How much cash do you get from one customer each month?
• Gross Margin %: After your costs of delivering the service/product, what percentage is profit?
• Monthly Churn Rate %: What percentage of customers do you lose each month?

Here’s an interactive calculator to do the work for you. Play around with the sliders to see how small changes in churn or revenue can massively change what a customer is worth, and therefore what you can afford to spend to get one.

Now you have a number. Your target CAC. This is your north star. Your entire ad budget and strategy now revolves around acquiring customers for less than this number. This single peice of information is more valuable than any industry benchmark. For a more detailed breakdown of these financials, have a look at our playbook for measuring advertising ROI.

So, what actually makes ads expensive or cheap?

Okay, so you know what you can afford to pay. Now let's look at why your costs will fluctuate. It's not black magic, it comes down to a few simple factors:

1. Your Platform: Where are you advertising? Google Ads is expensive for a reason. You're catching people with their hand in the air, actively searching for a solution. That intent is valuable. LinkedIn is pricey because you can target a specific job title at a specific company - that's incredibly powerful for B2B. Meta (Facebook/Instagram) is generally cheaper because you're interrupting people. You have to work harder to get their attention. Choosing the right channel is half the battle, and if you get it wrong you'll just be burning cash on the wrong audience.
2. Your Objective: What are you asking the algorithm to do? If you optimise for 'Reach' or 'Brand Awareness', the platform will find you the cheapest eyeballs, who are often the least likely to ever buy anything. If you optimise for 'Leads', it'll find people who like filling out forms. If you optimise for 'Purchases', it'll hunt for people with a history of buying stuff. The closer your objective is to the final money-making action, the more expensive the clicks and impressions will be, but often the more profitable the campaign becomes.
3. Your Audience & Competition: Who are you trying to reach? Targeting CTOs in London is going to be more expensive than targeting hobbyist knitters in a small town. You're bidding against every other company who wants that CTO's attention.

The chart below gives you a rough idea of the cost ranges you might expect for different objectives. These are just ballpark figures based on our experience running campaigns for hundreds of clients, from eCommerce stores to B2B software companies. For example, we've seen B2B software trials on Meta come in at $7, but B2B leads on LinkedIn cost $22 because of the hyper-specific targeting. The ranges are wide for a reason.

The key takeaway here is that you need to match your platform and objective to your business. If you sell £5,000 consulting packages, a £50 lead from Google Ads is a bargain. If you sell £15 t-shirts, it's a disaster. It's all relative. And if you're struggling to decide between platforms, we've got a detailed breakdown on the comparative costs of Meta, LinkedIn, and Google ads.

Your biggest problem isn't your budget, it's your offer

Here's the bit that most people miss. You can have the perfect budget, the perfect targeting, and the perfect platform, but if your offer is rubbish, you will fail. The number one reason I see campaigns underperform is a weak, high-friction offer that doesn't solve a burning pain for a specific person.

Most B2B websites are guilty of the worst offer of all: "Request a Demo". It’s arrogant. It assumes your prospect has time to sit through a sales pitch. It provides zero value upfront and screams "I am going to sell to you". For a busy decision-maker, it's an instant turn-off. You're asking for their most valuable asset – their time – in exchange for nothing. This creates huge friction, which kills your conversion rates and sends your ad costs through the roof.

A great offer does the opposite. It provides instant value. It solves a small part of their problem for free.

• For a SaaS company, this is a free trial with no credit card required. Let the product do the selling. We've seen this work time and time again, generating thousands of trials for clients.
• For an agency, it’s a free, automated audit tool.
• For a consultant, it’s a free 20-minute strategy session where you actually solve a problem, not just qualify them.

When you lead with value, you change the entire dynamic. You're not a salesperson; you're a helpful expert. This builds trust, lowers friction, and makes people *want* to talk to you. When you have an offer this good, you find that your ad costs plummet, because your ads convert so much better. Honestly, you need to be obsessed with your offer, not your ad spend.

Think of it like two seperate paths. Which one do you think is cheaper to advertise?

A simple framework for budgeting that actually works

Right, let's put this all together into a practical plan. Stop guessing and start making data-driven decisions. If you're wondering what kind of return you should be aiming for, you can learn more about unmasking your true ad ROI to set realistic goals.

Step 1: Know Your Numbers. Use the LTV calculator above. Don't move to step 2 until you have your target Customer Acquisition Cost (CAC). This is non-negotiable.

Step 2: Start Small and Test. Don't remortgage your house to fund your first ad campaign. For most service businesses, a starting test budget of £1,000-£2,000 a month is plenty to gather initial data. We've seen clients in local services start with modest test budgets and achieve great results. I remember one home cleaning company, for instance, that was getting leads for just £5 each. You don't need a huge budget to see if something is working.

Step 3: Measure Everything with ROAS. Forget vanity metrics like clicks and impressions. The only thing that matters is Return On Ad Spend (ROAS). For every £1 you put in, how many pounds do you get back out? A 3x ROAS (or 300%) is generally considered the break-even point after you account for margins and overheads, but for some of our eCommerce clients, we've hit 6x, 8x, even 10x ROAS. That's when you know you can scale.

Use this simple calculator to get a feel for your ROAS.

Step 4: Scale or Kill. Once you've run your test for a month or so, look at the data. Is your CAC below your target? Is your ROAS profitable? If yes, great. It's time to slowly increase the budget. If the answer is no, don't just throw more money at it. Go back and fix the problem. Is it the targeting? The ad creative? Or, most likely, is it the offer? Be ruthless. Kill what doesn't work and double down on what does.

Your Action Plan

Trying to budget for paid ads without knowing your numbers is like trying to navigate without a map. You'll just wander around wasting time and money. Here is the main advice I have for you to build a budget that is based on reality, not guesswork.

When to stop guessing and get an expert

As you can see, properly budgeting for and running paid ads is a lot more involved than just boosting a post on Facebook. It requires a strategic approach grounded in your own business's financial reality. You can absolutely learn to do this yourself, but it involves a steep learning curve and, often, a lot of wasted money along the way. You might find our step-by-step guide to fixing wasted ad spend a useful starting point.

Working with an expert or an agency isn't about just handing over the keys. It’s about leveraging years of experience from someone who has managed millions in ad spend, run thousands of tests, and already made all the expensive mistakes so you don't have to. We can look at your business, your LTV, and your offer and almost instantly see the opportunities and the roadblocks you're likely to hit. It's about shortening the time it takes to get from spending money to making money.

If you've read this far and you're feeling a bit overwhelmed, or you'd just rather focus on running your business, then it might be time for a chat. We offer a free, no-obligation strategy session where we can dive into your specific situation and give you a clear, actionable plan. There's no hard sell, just honest advice based on our experience. Feel free to book a call if that sounds helpful.

Hope this helps!