Learn how to work out what you can afford to pay for a lead or customer before running Facebook and Instagram ads, with a worked example and a free worksheet.

Let’s start with a confession. Maths isn’t everyone’s favourite subject. But there’s a good chance this is the most valuable bit of arithmetic you’ll do all year, and it needs nothing more than a calculator and a cup of tea.

The question: how much can you afford to pay to get a new customer?

Most businesses can’t answer this. They set an ad budget the way people choose a restaurant wine: pick something in the middle and hope it’s fine. Then they judge success on vibes (“we got some leads, I think?”). Knowing your numbers turns ads from a gamble into a decision.

Step 1: What does a customer actually bring in?

Start with your average spend per customer. Not per job, but per customer over time, if people come back.

For example, a hair salon might take £55 for a first visit, but many customers return every six weeks. A one-off job like a bathroom refit has a bigger single value but little repeat business.

Use real numbers from your records, not optimistic ones. Your future self will thank you.

Step 2: How much of that is profit?

Revenue isn’t profit. Take off the costs of delivering the service (staff time, materials, travel), and you have your gross profit per customer.

If you’re not sure of your margin, estimate it conservatively, and ask your accountant if you need a sanity check.

Step 3: Decide how far ahead you’ll count

If customers come back, you can count some of that future value, but be sensible. Counting five years of imaginary loyalty is how businesses talk themselves into spending too much.

A common approach is to choose a window you’re confident in (for example, the first 12 months) and count profit over that period.

Step 4: Find your break-even cost per customer

This is the most you can spend to win a customer without losing money:

Break-even cost per customer = gross profit per customer over your chosen window

Anything below it is profit. Above it is a loss (which can be fine on purpose, but ideally not by accident).

Step 5: Turn that into a cost per lead

Ads usually generate leads (enquiries, messages, form fills), and not every lead becomes a customer. So you need your conversion rate:

Break-even cost per lead = break-even cost per customer × share of leads that become customers

If one in four leads becomes a customer, that’s 25%, or 0.25.

A worked example (illustrative)

Let’s say a local physiotherapy clinic:

A new patient pays £50 for the first session and, on average, comes back for 4 more sessions at £50. That’s £250 revenue over the year.
After costs, about 60% is gross profit: £150 per customer.
Roughly 1 in 3 enquiries books an appointment: a 33% conversion rate.

So the break-even cost per lead is about £150 × 0.33 = £50.

That doesn’t mean they should aim to pay £50 per lead. It means that above £50, they lose money. A sensible target might be £20 to £30, leaving room for profit and for the occasional dud month.

(These figures are made up to show the method. Yours will differ, and that’s exactly the point.)

Why this changes everything

Once you have these numbers, you can:

Judge results properly. £30 per lead might sound expensive until you realise it’s well below break-even. Or £8 per lead might sound cheap until you notice nobody’s booking.
Set a sensible budget. If you need 10 new customers a month and 1 in 3 leads converts, you need about 30 leads. Multiply by your target cost per lead and you have a starting budget.
Know when to stop or change. If the cost per lead is well above break-even for a sustained period, it’s a signal to look at the offer, creative or follow-up, not just to spend more.
Say no to bad ideas. Including shiny new ones from salespeople who promise “guaranteed leads.”

Two quick reality checks

Capacity. Can you actually handle more customers? A wonderful campaign that fills your diary beyond what you can deliver creates unhappy customers, which is its own kind of expensive.

Lead quality. A cheap lead isn’t a good deal if it never answers the phone. Keep tracking how many leads become customers, not just how many arrive. We cover this in [link to Article 8].

Your next step

We’ve put together a simple worksheet that walks through these calculations: [download link]. Fill it in and you’ll know your break-even cost per customer, your target cost per lead and a starting budget.

If you’d like help interpreting the numbers or working out whether Meta ads make sense for your business, drop us a line and we’d love to help.

Last reviewed: 6 October 2026