How much should an Adelaide small business spend on ads?

The question comes up in roughly the second minute of every conversation we have about paid advertising. Someone's sitting across the table at a café on The Parade, they've decided this is the year they finally do ads properly, and they want a number. How much?

The honest answer is that the number isn't the starting point — it's the output. And most small businesses arrive at it the wrong way round, which is why so many ad budgets feel like money disappearing into a hole.

How most people pick a number (and why it fails)

The usual method is subtraction. You look at what's left after rent, wages, stock and the accountant, and whatever's still sitting there becomes the ad budget. Two hundred a month. Maybe five hundred in a good quarter.

There's nothing wrong with having a ceiling — every business does. The problem is that a leftovers budget has no relationship to what you're trying to buy. You've decided what you're willing to lose before you've worked out what you're trying to win. Then when the ads don't perform, there's no way to tell whether the ads were bad or the budget was never going to be enough in the first place.

An ad budget isn't an expense you tolerate. It's a price you're paying for customers. Once you know what a customer is worth, the number stops being a guess.

Start with what a customer is actually worth

Before you touch an ad account, work out three things. You can do this on the back of a receipt.

• Average sale value. What does a typical job or order come to?
• Your gross margin on it. What's left after the direct costs of delivering it — materials, product cost, the hours?
• How often they come back. Is this a one-off, or will they be back four times a year for the next three years?

Multiply those out and you've got what a customer is genuinely worth to you, not just what they spend on day one. A day spa client who books a $180 treatment at a 70% margin and returns three times a year is worth vastly more than the $126 in the till on the first visit. A builder doing one $90,000 extension is the opposite shape — enormous value, once.

Now the useful question: what portion of that am I willing to hand over to win the customer? A common instinct is somewhere between a fifth and a third of the first-purchase margin for repeat-business models, and more for one-off high-value work where the whole relationship is that single job. That number is your target cost per customer, and it's the hinge everything else swings on.

Working backwards to a monthly budget

Once you have a target cost per customer, the budget is arithmetic. Take a fictional Adelaide mobile mechanic:

Input	Example
Average job value	$320
Gross margin	60% → $192
Willing to spend to win one	25% of margin → $48
Enquiry-to-job conversion	1 in 3
So: target cost per enquiry	$16
Wants 15 extra jobs a month	45 enquiries
Monthly ad budget	$720

Those figures are invented to show the shape of the calculation — yours will be different, and your first month of real data will move them. But look at what the exercise gives you that a leftovers budget never could. You now have a target to measure against. If enquiries are costing $19, you're close and you tune. If they're costing $70, something is properly broken and you know within a fortnight instead of six months.

The floor: the point below which you learn nothing

There is a lower limit, and it's got nothing to do with what you can afford. Advertising platforms need a certain volume of results before they can optimise, and you need a certain volume before you can tell a good week from a fluke.

As a rough rule, budget enough to generate 30 to 50 results before you make any judgement call. If your target cost per enquiry is $16, that's roughly $500 to $800 of spend just to reach a conclusion you can trust. Spend $150, get four enquiries, and you genuinely cannot tell whether the campaign works — four is noise.

This is the real argument against dribbling money out. A concentrated $600 across one month on one platform teaches you something. The same $600 spread over six months, split between Meta and Google, teaches you nothing at all. We went through where that money actually goes in the post on running Meta ads on $500 a month — the short version is that focus beats coverage every single time at the small end.

The percentage sanity check

Once you have a number from the maths above, it's worth holding it up against your revenue to see whether it's sane. Marketing spend as a share of revenue varies enormously by industry, but the broad pattern looks like this:

Business stage	Typical share of revenue on marketing	What it's buying
Established, mostly word of mouth	Low single digits	Topping up, staying visible
Steady, wants measured growth	Mid single digits	Predictable extra volume
New, or entering a new market	Double digits	Buying awareness you don't have yet

If your calculation spits out a number that's 40% of revenue, the maths hasn't lied — your margins or your conversion rate have. That's a business problem to fix before it's an advertising problem. And if it comes out at half a percent, you're probably leaving growth on the table.

Where the money should go first

One budget, one platform, until it works. If people are actively searching for what you do — a burst pipe, a locksmith, an emergency dentist — that's Google's territory, and it's usually where a first budget belongs. If nobody's searching because they don't know they want it yet, that's Meta's. We laid out the choice properly in Facebook vs Google Ads: which should you start with.

Split your first budget across both and you'll halve two things at once: your data and your patience.

When to spend more, and when to stop

Scale up when the numbers say to, not when you feel optimistic. If your cost per customer is comfortably under target and has held there for a month, add 20–30% to the budget and watch what happens — costs usually creep as you reach further into the audience, so increase in steps rather than doubling overnight.

Pull back when cost per result has climbed well past target and stayed there for a couple of weeks after you've tried new creative. And genuinely stop — not tinker, stop — if the ads are working but the enquiries aren't converting. That's not an ad budget problem, and pouring more money in makes it worse, faster.

To know which of those you're in, you only need to watch a handful of numbers. We covered exactly which ones in the 5 metrics that actually matter in your ad account. Cost per result against your target is the one that answers this question.

The short version

Work out what a customer is worth. Decide what slice of that you'll pay to win one. Multiply by how many you want. Check it against your revenue for sanity, make sure it clears the learning floor, then put all of it in one place and leave it alone long enough to tell you something.

It's less exciting than picking a round number, and it takes an afternoon with a calculator. But it's the difference between spending on ads and investing in them — and it means that when someone asks how your advertising is going, you'll have an answer with a dollar sign in it.