The common advice — spend 5-10% of revenue — tells you what you can afford, not what a customer is worth. Work it the other way: take your average sale, multiply by your close rate to get the value of a lead, then decide what fraction of that you are willing to pay to acquire one. A business with a $2,000 average sale closing 25% of leads earns $500 per lead, and can rationally pay $100-150 for one. A business with a $200 average sale cannot.
"Spend 5-10% of revenue" is an accounting constraint dressed as a strategy. It answers what you can survive spending. It says nothing about whether spending it will work.
Two businesses with identical revenue can have wildly different sensible budgets. A law firm with a $5,000 average matter and a dental practice selling $180 cleanings should not spend the same way, even at the same turnover, because the value of one new customer differs by an order of magnitude.
Three numbers you already have, or can get from your own records in an afternoon:
**Average sale** — total revenue divided by number of customers, over the last 12 months. **Close rate** — of the enquiries you received, what fraction became customers. **Repeat value** — does a customer buy once, or several times over a few years?
Multiply average sale by close rate and you have the value of one enquiry. That number is your ceiling. What you actually pay should sit meaningfully below it, because the gap is your margin.
| Average sale | Close rate | Value per lead | Sensible cost per lead |
|---|---|---|---|
| $500 | 20% | $100 | $20 – $30 |
| $1,500 | 25% | $375 | $75 – $110 |
| $3,000 | 30% | $900 | $180 – $270 |
| $10,000 | 20% | $2,000 | $400 – $600 |
We charge $1999 once, not a monthly retainer. That is a deliberate choice and it has a trade-off worth naming.
A retainer aligns an agency's income with time spent, which quietly rewards slow work. A percentage-of-spend model rewards persuading you to spend more. A flat fee rewards finishing — and it caps your downside at a number you can decide on today.
The trade-off is that a flat fee suits building a system, not running one indefinitely. If you need someone managing campaigns every week forever, a retainer genuinely is the better structure, and we will tell you so on the call.
Repeat value. If a customer buys once at $500 but returns twice more over three years, their real worth is $1,500 — and your affordable acquisition cost triples.
Service businesses systematically undercount this. Anyone with maintenance work, annual check-ups, or referral flow is likely worth far more than the first invoice suggests. Working from first-sale value alone means you will lose every bidding war to a competitor who did the sum properly.
Between 5% and 10% is the usual answer, and it is a reasonable sanity check on affordability. But size the budget from lead value first, then check it against that percentage — not the other way around.
Ads buy attention now and stop the moment you stop paying. SEO compounds but typically takes months before meaningful traffic. Most service businesses need both: ads for cash flow this quarter, SEO for cost per lead falling next year.
Track cost per lead and cost per customer, not impressions or followers. If you cannot state what a lead currently costs you, that is the first thing to fix — before spending another cent.