A Practical Guide to Building a Smarter Paid Media Strategy
How much should you spend on ads?
That’s one of the first (and most important) questions every business asks when considering paid media. The answer? It depends—on your goals, audience, sales cycle, and what success actually looks like.
At Root Company, we help businesses set budgets that are grounded in reality and aligned with performance expectations. Whether you’re brand new to advertising or looking to scale up, this guide will help you understand how to set a realistic ad budget that supports your goals without wasting money.
Step 1: Get Clear on Your Business Goals
You can’t set a smart ad budget without knowing what you want to achieve.
Are you trying to:
- Generate leads or inquiries?
- Drive online sales?
- Build brand awareness in a new market?
- Promote an event or limited-time offer?
- Grow your email list or nurture audience engagement?
Your budget should reflect the cost and complexity of the goal. For example, brand awareness may cost less per result than generating high-quality leads in a competitive industry.
Step 2: Understand Your Sales Funnel
Not all conversions are created equal. Your budget should match where your ad campaigns fall in the funnel.
| Funnel Stage | Example Ad Goal | Typical Budget Approach |
| Awareness | Reach new audiences | Broad targeting, lower CPCs |
| Consideration | Educate or drive site traffic | Moderate CPCs, value content offers |
| Conversion | Generate leads or sales | Higher budget per action, optimized offers |
| Retargeting | Bring users back to convert | Smaller, efficient budget with strong ROAS |
Step 3: Estimate Cost Per Result
Start with platform benchmarks or historical data to estimate what each result might cost.
Average platform benchmarks (these vary by industry):
- Google Search CPC: $1–$5 (can exceed $10+ in high-competition niches)
- Meta Ads CPL (lead): $10–$50
- E-commerce CPA: $20–$100+
- Brand awareness CPM (cost per 1,000 impressions): $5–$15
Multiply your estimated cost per result by your target volume to set a baseline budget.
Example:
If your goal is 100 new leads at an average cost of $35/lead → $3,500/month budget
Step 4: Factor In Your Offer and Conversion Rate
Even a modest ad budget can drive results if your offer is strong and your funnel is optimized.
Ask:
- Is your landing page converting at 10%, or 1%?
- Do you have a strong call-to-action?
- Is your form, checkout, or donation process smooth?
If your conversion rate is low, you’ll need more ad spend to hit the same results—or better infrastructure to support your campaigns.
Step 5: Consider Your Sales Cycle and Lead Value
For lead generation or service-based businesses, look at:
- Your average lead-to-close rate
- Your average customer lifetime value (CLV)
- How long it typically takes for a lead to convert
Example: If your CLV is $2,000 and you’re spending $250 to acquire a customer, your return is 8x. That helps justify increasing ad spend as long as the cost stays profitable.
Step 6: Set a Test Budget (Then Scale)
You don’t need to commit to a massive budget out of the gate. Start small, track performance, and scale what’s working.
Suggested starting points:
- Local service businesses: $1,500–$3,000/month
- E-commerce brands: $3,000–$10,000/month (across multiple campaigns)
- Nonprofits using Ad Grants: Combine free Google Search spend with a paid $500–$2,000/month budget on social or display
Test for 30–60 days, analyze the results, and reinvest in what drives ROI.
Step 7: Align Budget With Your Capacity
Finally, make sure your budget matches your internal capacity. If your campaign works, can you:
- Handle an influx of leads or orders?
- Follow up with prospects quickly?
- Fulfill product or service demand?
Budget planning isn’t just about money—it’s about readiness.
Not Sure What Your Ad Budget Should Be?
A realistic ad budget starts with realistic goals. When you know what you’re aiming for—and what each result is worth—you can build a paid media strategy that’s focused, sustainable, and ready to grow.
At Root Company, we don’t just run ads—we help you map out the numbers behind your growth. From forecasting and funnel planning to media buying and conversion tracking, we make sure every dollar has a job to do.
We’ll run the numbers for you—based on your goals, market, and performance benchmarks.
Book your free strategy call now »