How much should a new business spend on ads?
Written by Jack Harrington and Gabriel Pozo, the founders of Urban Media, Melbourne. Updated .
There is no number that is right for every business, and anyone who gives you one without knowing your sums is guessing. There is a way to work out your own.
It starts with what a customer is worth to you, not with what ads cost.
Start with what a customer is worth
Work out the average profit from one new customer. If a job earns you a few hundred dollars of profit, you can pay far less to win it than if it earns you a few thousand. That figure is the ceiling on what you can pay for a customer, and it is yours alone.
Then do the sum
- Decide the most you would pay to win one customer.
- Guess how many enquiries turn into customers. Be careful and low.
- Divide: that tells you the most you can pay for one enquiry.
- Multiply by the number of enquiries you want in the test. That is your test budget.
A real example, with the caveat
Airwize, a Melbourne fireworks business we run ads for, saw 12 conversions, meaning leads that became sales, in the first month of Google Ads from $70 of ad spend. Those are our own unaudited figures, from one small account in one niche, and they are not a promise for your business. They show why a small, tested budget is a sensible place to start.
Before you spend
- A page for the ad to land on that says what the ad said.
- A way to answer enquiries the same day.
- Tracking, so you can see which ad produced which enquiry.
- A budget you can lose without hurting the business.
While it runs
Check it weekly. Compare the cost per enquiry with the most you can pay. If it is below, add a little. If it is above and the page and answers are good, change the ad before you add money.
More guides for new businesses
- Logo or website first for a new business
- What to do after registering an ABN
- New business launch checklist, Melbourne
- How to name a business in Australia
- Business name vs company name in Australia
- Do I need a website for a small business
- What is a brand identity for a small business
- Brand guidelines for a small business
- How to get your first customers as a new business
- Google Business Profile for a new business
- Website checklist before you launch a small business site
- What photos a new business needs
- Landing page or website for ads
- Social media profiles for a new business
- How to start a business in Melbourne
- How to start a clothing brand in Australia
- How to register a brand name in Australia
- Do I need an ABN to start a business in Australia
- Sole trader or company in Australia
- Do I need to register for GST
- How to choose a .com.au domain name
- How to get a logo for a new business
- Business email for a new business
- Privacy policy for a small business website in Australia
- What to post on social media when you start a business
- Setting up a business in Victoria
All of them are on the guides page.
Who is behind this
Urban Launch is built and run by Urban Media (ABN 28 169 446 902), a Melbourne studio founded by Jack Harrington and Gabriel Pozo. Urban Media makes video, design and websites for clients including Box Hill United, Brighton Grammar and Porsche Club Victoria.
If you want to talk to the people doing the work, call 0456 785 904. More about who we are, and how to check us, is on the About page.
Common questions
- What is a good starting ad budget?
- One you can afford to lose and that is big enough to get a handful of enquiries. Use the sum on this page to size it for your business.
- How long should I run a test before judging it?
- Long enough to see a meaningful number of enquiries, not just clicks. Judge on the cost per enquiry and on how many become customers.
- Is the ad spend part of what Urban Launch charges?
- No. Ad spend is paid direct to the platform and is separate from our price.
Start with a Launch Call
Live and generating enquiries within 45 days, or we keep working at no extra cost until you are. The Launch Call is where we check it is the right fit before we book anything in. For a real example, read the Airwize case study (12 conversions, meaning leads that became sales, in the first month of Google Ads from $70 of ad spend, our figures). You can also read how a launch package compares with hiring separately, or go to the packages and prices on the homepage.
More: Brand and website package, Melbourne, Startup package for a new business, Melbourne, Branding, website and photography package, Melbourne.