How Much Should You Spend on Advertising to Win Clients?

"How much should we spend?" is usually asked the wrong way round. Instead of picking a number and hoping, work out how much to spend on advertising from what a client is worth and how many you need. Here are three methods, and how to combine them.

This guide is part of our client acquisition strategy series.

Method 1: Percentage of revenue

Set marketing as a share of current or target revenue.

• Pros: simple, easy to control
• Cons: ties spend to past results, not future opportunity

Useful as a sanity check. Growth-focused and new businesses often need to spend a higher share than established ones.

Method 2: Objective and task

Start with a goal, then cost the activities needed to reach it.

Goal: 40 new clients this quarter → need 200 qualified leads at a 20% close rate → need a radio campaign plus search and retargeting to generate them → cost each activity.

• Pros: tied to real outcomes
• Cons: needs reasonable estimates of conversion rates

Method 3: Unit economics (work backwards from CAC)

1. Customer lifetime value (LTV): average gross profit per client over the relationship
2. Target CAC: the most you'll pay to acquire a client (for example, a third of LTV)
3. Clients needed this period
4. Budget = target CAC × clients needed

Example (illustrative): LTV $3,000 → target CAC $1,000 → 20 clients needed → $20,000 budget.

See how to calculate customer acquisition cost.

Combine them

Use unit economics to set the ceiling, objective and task to plan activities, and percentage of revenue as a reality check on cash flow.

Splitting the budget

A practical starting point:

• 70% proven channels: what already works
• 20% promising channels: scaling tests that showed results
• 10% experiments: new channels or creative

And across the funnel:

• Awareness: radio, TV, billboards, PR. Builds future demand. See radio advertising
• Intent capture: search, maps, directories. Captures current demand
• Retargeting and nurturing: brings back interested people. See retargeting

Don't spread too thin

A small budget split across six channels rarely reaches enough people often enough. Concentrate: fewer channels, more frequency, longer runs. Then add channels as results justify it.

Budget for more than media

Include creative and production, landing pages, tracking tools, and agency or freelance fees. A media budget with no money for good creative often underperforms.

Test, then scale

1. Run a test with clear tracking (codes, URLs and call tracking)
2. Give it enough time (how long advertising takes)
3. Compare CAC by channel
4. Move money to what works

Warning signs your budget is wrong

• Too low: no measurable change in branded search, leads or sales after a reasonable period
• Too high for your funnel: leads arriving faster than you can follow up, or CAC rising sharply as you add spend
• Wrongly split: strong awareness but no way to capture demand, or search ads with no one searching

Review monthly against your KPIs and adjust. For help choosing channels, see choosing the right advertising channels.