Picking an ad budget by gut feel leads to either wasted spend or campaigns too small to learn anything. Working backwards from your goals gives you a number you can defend.
Start with the customers you want
Decide how many new customers you want from ads each month. Be realistic about how many you can actually serve.
Estimate your conversion rates
Estimate what share of leads become customers. If you close one in four leads and want 10 new customers, you need about 40 leads.
Estimate cost per lead
Use your past results or a conservative starting estimate for your industry and market. If leads cost about $40, 40 leads means roughly $1,600 a month.
Check it against customer value
Divide the budget by expected customers to get client acquisition cost, then compare it to what an average customer is worth. If the numbers do not leave profit, adjust the offer, the follow-up, or the goal.
Start, measure, adjust
Run the budget for a full month, compare real results to your estimates, and adjust. Your second month's budget will be far more accurate than your first.