How Much Should You Spend on Ads? Work It Backward From Your Economics
Not a benchmark article. A worksheet: derive your ad budget from margin, close rate, and capacity — then let performance, not a percentage rule, decide when to raise it.
"How much should I spend on ads?" is usually answered with folklore: spend 10% of revenue, start with ₱500 a day, match your competitors.
All of it dodges the real question. Your ad budget isn't a percentage of anything — it's a function of three numbers you already have: what a customer is worth, what a conversion can afford to cost, and how many conversions you can actually handle. This article walks through the arithmetic I do with every client before a single campaign launches.
TL;DR
Step 1: What can a conversion afford to cost?
Ecommerce. Take one typical order:₱1,100 is the most you can pay for a first purchase and break even. If roughly 30% of customers buy again, lifetime margin is higher — say ₱1,500–₱1,800 — and you can decide how much of that future value you're willing to spend today. A business that only counts first-order margin under-bids; one that spends full LTV on day one runs out of cash waiting for reorders. Work through your real numbers with the customer LTV guide.
Services and lead gen. Chain the funnel:Every number in that chain matters. If close rate is actually 8% and not 20%, your affordable CPL drops from ₱2,000 to ₱800 — which is why lead quality tracking isn't optional. More on that in getting leads but no clients.
If you can't fill in these numbers, that's the real finding: you're not ready to buy traffic yet, because you won't be able to tell winning from losing.
Step 2: The starting budget — buy data, not profit
A new account's first job is to answer questions: which audience, which message, which channel, at what cost. Answering questions costs money, and the budget has to be big enough to produce answers within your patience window.
The working rule I use: your monthly test budget should buy roughly 30–50 conversions a month at your estimated cost per conversion. Below that, you can't tell signal from noise, and Meta and Google's learning systems can't stabilize either.
If that minimum is more than you can risk for 2–3 months without pain, the honest options are: start with one channel only (usually the one closest to existing demand — see Google Ads vs Facebook Ads), or fix your offer and conversion path first so each visit works harder. What doesn't work is spreading ₱10K across two platforms and five audiences and concluding "ads don't work for us." I've written about small-budget structure in Facebook ads on a low budget.
One more rule: your test budget must be money you can lose without flinching. Not because you will lose it, but because flinching mid-test — pausing everything in week two after a bad three days — costs more than the bad days do.
Step 3: The ongoing budget — think marginal, not average
Once campaigns work, "how much should I spend?" changes meaning. The answer stops being a number and becomes a rule:
Keep increasing spend while the next peso still buys a conversion for less than it's worth. Stop when it doesn't.
Averages hide this. An account spending ₱300K/month at a blended ₱500 CPA might be earning that average as: the first ₱200K producing conversions at ₱400, the last ₱100K producing them at ₱1,000. If your affordable CPA is ₱700, the right move isn't "scale, the average looks great" — it's to find and cut that last inefficient ₱100K, or fix what it's buying.
Practical ways to see marginal cost:
Step 4: The ceiling nobody models — capacity
The cheapest way to waste a great campaign is to win it. A clinic that can take 40 new patients a month doesn't benefit from 200 leads — response time slips, no-shows climb, reviews dip, and the "ads problem" three months later is actually an operations problem. Set the budget against what sales, fulfillment, and inventory can absorb, and raise both together.
What about the percentage rules?
"Spend 5–10% of revenue on marketing" is fine as an accounting sanity check and useless as an operating rule — it tells you to cut spend when ads are your growth engine and to overspend when your funnel is broken. Use economics to set the budget and the percentage only to notice when something looks extreme.
The 15-minute worksheet
1. Contribution margin per order, or value per qualified lead. Write the number.
2. Decide the share of that value you'll pay for acquisition. That's your max CPA/CPL.
3. Multiply expected CPA by 30–50. That's your minimum monthly test budget.
4. Confirm you can sustain it for 2–3 months. If not, narrow to one channel.
5. After it works: raise in 20–30% steps and watch marginal, not blended, cost.
6. Check capacity before every raise.
Want the numbers checked before you commit a budget?
Working out affordable CPA, channel split, and a scaling rule is the first thing I do with any new client — before campaigns, before creative. If you'd rather do that with someone who has run this math across ecommerce, services, healthcare, and nonprofits, send your site and numbers through the project fit page, or see how I approach the whole system as a PPC strategist.
Related reading:
Written by Vince Servidad
Filipino PPC strategist. A seven-figure Shopify brand and 10+ years across Google Ads, Meta Ads, stores, tracking, and content.
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