Asking 'how much should I spend on advertising?' without knowing the margin is like asking how much rent a shop can afford without knowing its turnover. The right budget depends on order value, the margin it leaves and the number of new customers the business can handle.
Calculate the maximum acceptable CAC first
If a first order worth 50 € including VAT leaves a contribution margin of 20 € after product costs, payment fees, packaging and variable shipping costs, a 25 € acquisition cost already makes the first purchase unprofitable. It may only be acceptable if customers return often enough.
The maximum acquisition cost should therefore be based on margin and customer lifetime value, not on whatever amount is available in the bank account.
Separate testing budgets from ongoing budgets
A new campaign needs enough funding to gather data, but also limits so poor targeting does not turn into a major loss. Each test should answer a specific question: can a product, audience, keyword or creative generate sales at a sustainable cost?
Increase spending gradually
A campaign that works at 20 € per day will not necessarily remain profitable at 200 €. The audience, competition and placement quality change as spending rises. Scale in stages while monitoring acquisition costs and margins.
Separate acquisition from retargeting
Retargeting reaches people already familiar with the brand and often delivers higher conversion rates. It should not be confused with acquiring new customers. Track the two budgets separately.
Include creative production
Advertising costs more than media spend. Photography, video, design, editing and management time are all marketing costs. A campaign with a good media ROAS may be less attractive if it requires expensive production.
Set a stop rule
Before launching, decide the maximum amount you are willing to spend without a sale or sufficient positive signals. This prevents continuing a campaign simply because money has already been spent.
Link the budget to your CAC, margins and the cash flow forecast.