“How much should we spend on marketing?” is the wrong first question. The right one is: “How much is a customer worth to us, and how much can we afford to pay to get one?” Answer that, and the budget almost sets itself.

Start With Unit Economics

Calculate your average order value, gross margin, and — if customers buy more than once — lifetime value. Your maximum allowable acquisition cost is the ceiling; your target acquisition cost should sit comfortably below it so every sale contributes profit.

Split the Budget by Job

A healthy budget usually funds three jobs: capturing existing demand (search, shopping, remarketing), creating new demand (social, content, video), and converting more of what you already have (CRO, email). Businesses that spend only on capture eventually run out of demand to capture.

Reserve a Testing Allocation

Set aside 10–15% for experiments. Most tests will fail; the ones that win pay for all the rest. Without a testing budget, next year’s plan is just this year’s plan with inflation.

Review Monthly, Rebalance Quarterly

Budgets are hypotheses. Check performance monthly, but resist the urge to yank spend around weekly — channels need time to stabilize. Rebalance meaningfully once a quarter based on blended results, not last week’s dashboard.