How much should a local business spend on ads?

5 minute read

Many owners pick an ad budget out of the air, then judge it on a feeling. A better way is to work backwards from the number of new customers you want.

Work backwards in three steps

1. How many new customers do you want each month? Be realistic about how many you can actually serve.
2. What share of leads become customers? If 1 in 4 leads books and buys, your conversion rate is 25%.
3. What does a lead cost in your area? This varies by industry and location; start with an estimate and adjust after the first month.

Budget = (customers wanted ÷ conversion rate) × cost per lead. For example, 15 customers at a 25% conversion rate need 60 leads. At $60 per lead, that’s about $3,600 a month.

Fix conversion before raising the budget

The fastest way to make ads cheaper is to convert more of the leads you already get. Answering in under a minute and following up properly can raise conversion sharply, which lowers your cost per customer without spending a cent more on ads.

Give it time

Ad platforms need a few weeks of data to find the right people. Judge results after 60–90 days, not after the first week.

Try the numbers yourself with our Ad Budget Calculator.