What Should You Really Spend on Ads?

A practical guide to setting a Main Street ad budget using simple CAC/LTV math.

Picture this.

You run a local coffee shop. You're finally testing Meta Ads—just $500 to see what happens. The results come in: 20 new customers. Not bad. But now you’re staring at dozens of online “experts” telling you to scale to $5,000 next month or you’re “leaving money on the table.”

Meanwhile, Coca-Cola quietly drops four billion dollars a year on advertising without blinking.

Here’s the real truth: Main Street isn’t Madison Avenue.

Independent businesses don’t need wild budgets or “10x scaling tactics.” You need predictable growth, steady lead flow, and a budget that keeps cash flow healthy.

This guide walks through:

• What a realistic ad budget looks like for local businesses

• How to use simple math—CAC and LTV—to decide how much to spend

• How national brands distort everyone’s expectations

• Why Google and Meta behave differently (and how you can win on both)
  

If you’ve been Googling “how much should I spend on ads?” or “small business ad budget,” this one’s for you.

1. What a Real Ad Budget Looks Like for Main Street

Most independent businesses aren’t rolling the dice with big-agency budgets. You don’t need to. The average healthy ad budget for a local business sits around 5–10% of revenue, and even that is split between testing and scaling what already works.

You’re not chasing broad awareness. You’re chasing leads, foot traffic, and calls—and that’s a very different game.

Here are 2025 benchmarks pulled from current ad platform data, agency reports, and local business performance studies:

Typical Monthly Ad Spend by Local Business Type

Business Type	Google Ads	Meta Ads	Budget % of Revenue	Common Goal
Solo Local (bakery, gift shop)	$500–$1,000	$100–$500	5–7%	20–50 leads/month
Service Business (plumber, HVAC, insurance)	$1,000–$2,500	$500–$1,000	7–10%	50–100 calls/month
Growing Retail Shop (boutique, home goods)	$2,000–$5,000	$1,000–$3,000	8–12%	$10K–$20K revenue lift

Why these ranges?

• Google Ads: Great for intent—people actively searching. A $15–20/day budget ($450–$600/mo) often yields 20–50 meaningful clicks in low-competition niches.

• Meta Ads: Better for awareness, retargeting, and getting on people’s radar. CPMs usually land between $11–$20 for local markets.

A solid starting point is:

• 50–70% to Google for high-intent traffic

• The remainder to Meta for nurture and follow-up

Pro tip: Use Google’s Keyword Planner to check real CPCs. You’ll see huge differences:

• “Local bakery” might cost $1–2/click

• “Insurance quote” might cost $10–30/click

The more competitive the industry, the more your budget needs to stretch.

Most importantly: Start small, measure fast, then scale slowly. Testing 10–20% of your monthly budget is plenty.

2. Price Your Ad Spend Off CAC and LTV—Not Gut Feel

Here’s where most businesses get into trouble: they pick an ad budget because it “feels right.”

But your budget should be tied to two simple numbers:

• CAC (Customer Acquisition Cost) → How much you spend to earn one new customer

• LTV (Lifetime Value) → How much revenue (after margin) that customer brings in long-term

Your target ratio is:

LTV : CAC should be 3:1 or better(Meaning: spend $1 to earn $3+ over time)

Let’s break it down with a Main Street example.

Example: A Florist

• Average order value: $50

• Repeat rate: 20%

• Annual purchase frequency: 3 times

• Gross margin: 50%

Step 1: Calculate LTV

LTV = (AOV × Frequency × Customer Lifespan) × Margin= ($50 × 3 × 1 yr) × 0.5= $75

Step 2: Calculate CAC

• Monthly ad spend: $800 (Google $500 + Meta $300)

• New customers acquired: 20

CAC = $800 ÷ 20 = $40

Step 3: Evaluate the Ratio

LTV:CAC = $75 ÷ $40 = 1.875:1

Not great. Not terrible. But below the benchmark.

Fixing the Ratio

You have two levers:

1. Improve LTV

Add:

• A simple loyalty program

• Better email follow-up

• A next-purchase discount

If that boosts repeat revenue by even $25/year, your LTV becomes $100.

2. Lower CAC

Clean up your ad efficiency:

• Add negative keywords

• Improve your landing page

• Tighten your audience targeting

Drop CAC from $40 → $32 and you’re suddenly above 3:1.

This is the math Main Street businesses should run every quarter—not just when ads “feel expensive.”

Benchmarks for Local CAC/LTV

• Healthy local business ratio: 3–4:1

• Below 2:1 = you're burning budget

• Service businesses hit 3:1 faster (recurring revenue)

• Retail shops need loyalty to push LTV up

Try this:

Run a 14-day CAC test.

Track:

• Ad spend

• Leads

• New customers

• First purchase amount

If CAC > LTV ÷ 3 → pause and refine targeting.

3. National vs. Local: Why Google and Meta Treat You Differently

Here’s where it gets tricky.

Google and Meta are built for billion-dollar advertisers, not local bakeries and hardware stores. Their algorithms prefer giant budgets, huge audiences, and massive datasets.

But that doesn’t mean local businesses can’t win. You just play a different game.

How Spend Levels Shift the Entire Playing Field

Metric	Local/Main Street	National Brands	What It Means
Monthly Spend	$500–$5,000	$100K–$50M+	Nationals dominate auctions; locals must target smarter
Focus	High intent: “near me”	Awareness at national scale	Locals win relevance; nationals win volume
ROAS Target	4–6x	2–4x	Locals can’t afford waste—and shouldn't
Platforms	Google + Meta	Google, Meta, YouTube, TV, Display	Local = precision; national = saturation

Some eye-openers:

• Many national food & beverage brands spend $214M/month on Google Ads alone

• CPMs for big brands can sit at $28+

• Most local businesses spending $25K/month on Google are thrilled with 20x+ returns

Local businesses don’t need broad reach—they need the right people at the right time.

Why Meta Behaves Differently Than Google

• Google captures intent (people searching for what they want)

• Meta interrupts behavior (people scrolling past everything)

Locals thrive on:

• Google for immediate leads

• Meta for retargeting, brand lift, and community presence

The winning strategy isn’t “pick one.”It’s use both for different jobs.

As one marketer wrote on X:

“Meta interrupts scrollers. Google captures searchers. Use both and you’ll double your profitability.”

Main Street Wins by Playing Smart—Not Big

If you remember one thing from this guide, make it this:

Your budget doesn’t need to be big. It needs to be intentional.

Start with:

• $500–$1,000/month

• A simple LTV:CAC target of 3:1

• A mix of Google for intent and Meta for nurture

Track your numbers weekly.

Adjust monthly.

Scale only when the math supports it.

And never—ever—compare your spend to national brands. You’re playing a different, smarter game.

Want to Make This Even Easier?

If you have a question about your budget or want feedback on your current ad setup, reach out and tell me your biggest ad spend challenge.

I read every message.