One of the first questions every local business owner asks us is some version of: “How much should I actually be spending on Facebook and Instagram ads?” The honest answer is that it depends on your goals, margins, and market — but there is a practical framework you can use to land on a number with confidence.
Start With Your Customer Lifetime Value
Before setting a budget, know what a customer is actually worth to your business over time, not just on their first purchase. A business where the average customer returns multiple times per year can afford a higher cost-per-lead than a business with a single, low-margin transaction.
A Simple Starting Framework
- Testing phase (first 30 days): $500–$1,000/month to gather data
- Growth phase: 5-10% of monthly revenue reinvested into ads
- Scaling phase: Increase budget proportionally as cost-per-lead stays stable or improves
Why Most Local Businesses Underspend on Testing
Facebook’s ad algorithm needs data to optimize effectively. Businesses that spend too little in the first few weeks often conclude “ads don’t work” when in reality the campaign never left the learning phase. Budgeting for a genuine testing period is one of the most important — and most skipped — steps.
Instagram vs. Facebook: Where Should the Budget Go?
For most local service businesses, Facebook still drives strong lead volume, particularly with people over 35. Instagram tends to perform better for visually-driven businesses like restaurants, salons, and retail. We typically recommend running both from a single campaign and letting the platform’s delivery data tell you where to shift budget.
The Bottom Line
There is no universal “right” ad budget — but there is a right process for finding yours. Start with a testing budget, track cost-per-lead against your actual customer value, and scale what works. If you’d like help building a custom ad budget for your business, we’re happy to put one together for free.