How to set a marketing budget from your own numbers

Step 1: Gather five numbers

You need five figures, and rough estimates will do for a first pass.

1. New-customer revenue target for the next 12 months. Exclude repeat customers who would come back anyway.
2. Average sale per new customer: average job value, average first order or average treatment plan.
3. Gross margin on that sale, as a percentage.
4. Close rate: the share of genuine enquiries that become paying customers.
5. Repeat value: roughly how much more a typical new customer spends with you over the following two or three years.

If you don't know one of these, write down your best guess and mark it. The point is to make the assumptions visible.

Step 2: Calculate the enquiries you need

Divide the revenue target by the average sale to get customers, then divide by the close rate to get enquiries.

Worked example: a fictional Victoria roofing company.

• New-customer revenue target: $600,000
• Average job: $12,000
• Gross margin: 35%
• Close rate: 25%
• Repeat value: small; roofs last for years, but referrals matter

Customers needed: $600,000 ÷ $12,000 = 50 new jobs. Enquiries needed: 50 ÷ 0.25 = 200 genuine enquiries a year, or about 17 a month.

That number alone is useful. If the business currently gets 10 genuine enquiries a month, it needs 70% more, or a better close rate.

Step 3: Work out what you can afford per enquiry

The affordable cost per enquiry comes from the gross profit on a won job. Each won job earns $12,000 × 35% = $4,200 gross profit.

Suppose the owner is willing to spend up to 20% of that gross profit to win the job: $840 per won job. With a 25% close rate, each enquiry is worth paying up to $840 × 0.25 = $210.

Annual budget ceiling: 200 enquiries × $210 = $42,000, or $3,500 a month.

Sanity check against revenue

Compare the result with a percentage of revenue to catch errors. $42,000 is 7% of the $600,000 new-customer target. If your worked-back figure is wildly different from what similar businesses spend, recheck the inputs, especially close rate.

Improve the close rate before raising the budget

A better close rate cuts the budget needed for the same revenue. If the roofer lifts close rate from 25% to 30%, through faster replies, clearer quotes and a follow-up call on every quote, it needs only about 167 enquiries. At the same $210 per enquiry, that is about $35,000, saving roughly $7,000 a year.

Step 4: Spread the budget across the year

In Greater Victoria, demand rarely arrives evenly, so the budget shouldn't either. For each month, ask two questions: when do customers start looking, and when do you have capacity to do the work?

For the roofer, homeowners often start looking for replacements before the wet months, and emergency calls rise once the rain arrives. A reasonable spread might be:

A café near the harbour, a Langford gym or a Sidney gift shop would have a completely different pattern. Use your own monthly sales history from the past two or three years. Our seasonal cash and staffing plan builds this curve in detail.

Step 5: Split the budget across channels

Put most of the budget into one or two channels you can measure, and reserve a small share for tests. A starting split for a local service business might be:

• 60–70% in your proven channel, measured by cost per won customer
• 20–30% in a second channel you are building
• 10% for a controlled test

Don't divide a $3,500 monthly budget across eight channels. Each gets too little to produce a readable result.

Step 6: Run a 90-day test properly

Every test needs a budget cap, a measure and a decision date before it starts.

1. Pick one change: a new channel, a new offer or a new area.
2. Set a spending cap, for example $1,000 over 90 days.
3. Decide the measure: cost per won customer, not clicks or impressions.
4. Write down the pass line, for example "under $900 per won job".
5. On the decision date, keep, change or stop. Don't extend a failing test because it "might be working".

Step 7: Track it monthly

A budget only works if you check it against results each month. Keep one table with these columns for each channel: spend, enquiries, quotes, wins, revenue, cost per enquiry and cost per win. Our marketing spend review builds this table from your accounts if you have never had one.

Common mistakes

• Counting every enquiry as genuine. Spam, job seekers and wrong numbers inflate the figures and make channels look cheaper than they are.
• Ignoring close rate. It is often the cheapest lever available.
• Judging channels on clicks. Only paying customers pay wages.
• Spending hardest when you're already full. Spend ahead of capacity, not on top of it.
• No end date for tests. Open-ended tests drain budgets.
• Leaving out staff time. An hour a day of social posting is a marketing cost.

Where to go from here

Use the result as a ceiling, not a target. If you can win the work for less, keep the difference. If the numbers raise bigger questions, such as which services to push, read the one-page growth plan guide, or book a single advisory session. Fees are on the pricing page.