If you’re running a small business and wondering, “How much should I spend on ads?” you’re not alone. It’s one of the most common questions we get from clients starting out with Google and Meta Ads.
Here’s the truth: budgeting isn’t about picking a number out of thin air. It’s about aligning your advertising spend with what you want to achieve.
In this guide, we break down a clear, actionable approach to setting an ad budget that aligns with your business goals, supported by real-world examples and trusted best practices. If you want to know how much should I spend on ads, this guide has you covered.
Why Budgeting Should Follow Your Goals
Most businesses approach advertising backwards. They ask, “How much can I afford to spend?” instead of “What result am I trying to achieve?” If you’re wondering how much should I spend on ads, this mindset shift is critical.
This mindset leads to wasted budget and disappointment. Without clear goals, it’s easy to spread yourself thin, chasing metrics that don’t necessarily grow your business.
Instead, start with your goals:
- Are you trying to drive leads?
- Do you want to increase sales?
- Are you focused on building brand awareness?
Each goal requires a different strategy and level of investment. By understanding the outcomes you want, you can reverse-engineer your ad budget.
Example: Imagine you want to generate 20 new leads this month. If you’re comfortable paying $25 per lead, your budget is simple:
20 leads × $25 per lead = $500 budget
When you start with goals first, budgeting becomes math, not guesswork. This approach not only clarifies your financial commitment but also sets realistic expectations. Businesses that plan this way tend to see better returns because their ad spend is targeted and intentional.
For more on goal setting in marketing, check out HubSpot’s guide to setting SMART goals.
Understand CPA (Cost Per Acquisition)
Your CPA is what it costs you to acquire one customer, sale, or lead through advertising. Understanding CPA is crucial when figuring out how much should I spend on ads.
If you’ve run ads before, you may already know your average CPA based on past campaign performance. If not, you can use industry benchmarks or run a short test campaign to get an estimate. For instance, according to WordStream’s Google Ads benchmarks, the average CPA across industries can range widely from $30 to over $100.
Why it matters: Understanding your CPA gives you a clear, predictable formula:
Desired Results × CPA = Your Budget
Without this number, you’re flying blind, unsure whether your ad spend will yield meaningful results. Tracking your CPA also helps you measure the effectiveness of your campaigns and make informed adjustments over time.
If your CPA is too high, it might signal issues with your targeting, ad creatives, or even your website’s conversion process. Google’s guide to improving ad performance can be a helpful resource if you’re struggling to optimise.
As your campaigns mature, revisiting and refining your CPA target becomes crucial. This allows your advertising strategy to evolve with your business growth and changing market dynamics.
Daily Budget vs Lifetime Budget
When setting up ad campaigns, one of the first choices you’ll face is whether to set a daily budget or a lifetime budget. Understanding these options is a key step in deciding how much I should spend on ads.
Daily Budget:
- Ideal for continuous, always-on campaigns.
- Helps manage cash flow with consistent, predictable spending.
- Great for businesses looking for steady lead or sales generation.
Lifetime Budget:
- Best suited for short-term promotions, launches, or seasonal campaigns.
- Allows platforms to allocate budget more flexibly, optimising spend across different days.
- Perfect for running tests or highly targeted marketing pushes.
Tip: For beginners or businesses testing the waters, setting a two-week lifetime budget is a smart strategy. It provides a structured timeframe to collect meaningful data and optimise campaigns without long-term financial commitment. After you identify what works, transitioning to a daily budget can help you scale predictably.
For a more detailed look at budgeting strategies, visit Google Ads’ budget setting best practices.
Additionally, it’s important to remember that your choice between daily and lifetime budgeting should align with your broader marketing calendar. Planning around peak seasons, major sales events, or business milestones can enhance the effectiveness of your budget allocation.
Why Small, Focused Budgets Work Better
One common misconception is that bigger budgets automatically lead to better results. In reality, a small, focused budget often delivers more efficient outcomes, especially for small businesses.
Here’s why:
- Targeting a specific audience ensures your ads reach people most likely to convert.
- Promoting a single, clear offer eliminates confusion and maximises conversion rates.
- Focusing on one goal (leads, sales, or brand awareness) gives platforms better signals to optimise your campaigns.
A concentrated approach helps platforms like Google and Meta’s AI learn faster and adjust more accurately. Spreading a limited budget too thin across multiple audiences or goals often leads to weak results and wasted spend.
Moreover, smaller, focused campaigns allow you to collect cleaner data. This makes it easier to spot patterns, identify high-performing elements, and scale effectively without unnecessary risk.
Start small. Focus big. Learn fast.
Still unsure where to focus? Meta’s Audience Targeting Guide offers great insights for refining your strategy.
If you’re ready to take your advertising to the next level and finally answer the question of how much should I spend on ads, focus on starting small and refining over time.
Key Takeaways
- Start with goals, not guesses. Define the outcomes you want and let that guide your budget.
- Know your CPA to forecast costs accurately and assess your ad performance.
- Use lifetime budgets for testing periods and daily budgets for ongoing, steady campaigns.
- Focus your budget narrowly to maximise impact and efficiency.
- Refine over time as you collect more data and your business evolves.
By shifting your mindset from “How much should I spend?” to “What am I trying to achieve?”, you’ll set yourself up for smarter, more effective advertising.
FAQ
What’s a good starting budget for ads? If you’re brand new, starting with a range of $500–$1,500 for an initial test period gives you enough data to make informed decisions without risking too much capital.
Should I run Google Ads or Meta Ads first? It depends on your business type and goals. Google Ads is intent-based—great for capturing high-intent search traffic. Meta Ads (Facebook/Instagram) are discovery-based—excellent for building awareness and engaging users who may not yet know they need your product.
What if my first campaign fails? Consider your first budget an investment in learning. Even if you don’t achieve immediate results, the data collected helps refine targeting, creative, and bidding strategies for future campaigns. Google’s ad testing tips can help improve your approach.
For more resources and internal case studies, check our Mission Driven Marketing blog.