How much should a small business spend on ads? An honest framework

“How much should I spend?” deserves a better answer than a made-up benchmark. Here's the honest framework — four steps of arithmetic you can do on the back of an envelope, using your numbers rather than someone else's averages.

Step 1: work out what a customer is worth

Average order value × gross margin = what you actually keep per sale. If customers reorder (coffee, consumables, services on retainer), multiply by a realistic first-year repeat rate. That figure — not revenue — is what a new customer is worth to you.

Step 2: set your break-even cost per customer

Decide what you're willing to pay for one new customer. At break-even it's the Step 1 number; most small businesses aim to pay half to two-thirds of it, so each sale still contributes. Write this number down — it's the only “benchmark” that matters, and it's yours.

Step 3: fund a real test, not a gesture

Ad platforms learn from conversions. A budget that can't produce a few dozen conversions in a month can't teach the algorithm — or you — anything. Rough rule: your monthly test budget should cover at least 30–50 times your expected cost per conversion. If that maths produces a number you can't fund, don't run thinner ads — pick a cheaper conversion to optimise for (enquiries instead of purchases), or fix the site's conversion rate first so each click goes further.

Step 4: commit for 30 days, then judge

One platform, one month, weekly checks against the Step 2 number. Kill it, keep it, or scale it — but decide on your numbers, not on how the dashboard feels on a bad Tuesday.

The uncomfortable corollary

If your site converts poorly, every one of these numbers gets worse before ads even start. It's why we'll say “fix the page first” on a call even though the ads sprint is the bigger job — the framework above is also the maths of why.

The ads launch sprint (£1,500) runs exactly this: setup, one platform, 30 days, and a playbook with your numbers in it. Or bring your envelope maths to a free 20-minute call and we'll sanity-check it together.