Alevli framework
The margin-back budget
A budgeting method that derives an SMB's marketing spend backwards from its own prices, margins and capacity, where contribution per customer sets what a lead may cost and capacity sets how many leads to buy, instead of picking a percentage of revenue that fits no business in particular.
The common way an SMB sets a marketing budget is forwards: a number that feels survivable, or a percentage of revenue borrowed from an article written about no business in particular. The margin-back budget runs the other direction. Price and margin already determine what a customer is worth; a deliberate share of that worth determines what a customer may cost; the close rate determines what a lead may cost; capacity determines how many customers to buy. Run backwards, the budget stops being an opinion and becomes a conclusion, including, sometimes, the conclusion that the business cannot yet afford its own market.
The margin-back budget
Contribution per customer
Allowable per customer
Allowable per lead
The market test
The budget
Use it when
- A client asks "how much should we spend on marketing?" and deserves arithmetic instead of a rule of thumb
- Deciding whether a business's economics can support paid acquisition at all
- A client's budget was inherited from last year and nobody remembers the reasoning
Do not use it when
- Margins, close rates, or repeat rates are unknown; the method computes garbage from garbage, so measure first
- Brand-building spend, which buys future demand and cannot be judged per-lead
The steps
- Compute contribution per customer. Average sale value × gross margin, minus other variable costs of serving one customer. Use first-year value; include repeat purchases only at the rate the business can actually demonstrate, not the rate it hopes for.
- Choose the acquisition share. Decide what fraction of that contribution may be spent to win the customer. As a planning default: around 25 to 30% for one-off purchases, up to 40% where repeat business is proven, so most of the margin stays in the business. Write the chosen share down; it is a policy, not a law of nature.
- Convert to an allowable cost per lead. Allowable cost per customer × lead-to-customer rate. A business that closes one lead in four may pay a quarter as much per lead as one that closes them all.
- Run the market test. Compare the allowable cost per lead to the real market cost per lead from auction data. Allowable ≥ market: marketing is affordable, continue. Allowable < market: the economics fail before the first euro is spent. Fix prices, margin, or close rate first, because no campaign can rescue a business that loses money on each customer it wins.
- Size the budget from capacity. Target new customers per month × allowable cost per customer. Then check it clears the spend floor: a budget can be affordable by margin and still too small to feed the bidding algorithm. The two constraints are independent, and a fundable budget must clear both.
Worked example
Two businesses, same method, opposite conclusions. Illustrative numbers.
Case 1, a hair salon (low ticket, proven repeat): passes.
| Input | Value |
|---|---|
| Average visit | €55, gross margin 70% → €38.50 |
| Demonstrated year-one visits per new client | 4 → €154 contribution |
| Acquisition share (repeat proven) | 30% → €46 per new client |
| Lead-to-client rate (bookings from enquiries) | 60% → allowable €28 per lead |
| Market cost per lead (auction data) | ~€12 |
| Market test | €28 ≥ €12, passes |
| Capacity: new clients per month | 25 |
| Margin-back budget | 25 × €46 ≈ €1,150 / month |
The salon's budget is set by its chair capacity, not its economics. The comfortable gap between €28 allowable and €12 actual is margin of safety, not an instruction to bid more.
Case 2, a cleaning company (thin margin, one-off contracts): fails.
| Input | Value |
|---|---|
| Average first contract | €180, gross margin 25% → €45 |
| Repeat rate | Unmeasured → excluded |
| Acquisition share (one-off) | 25% → €11.25 per customer |
| Lead-to-customer rate | 50% → allowable €5.60 per lead |
| Market cost per lead (auction data) | ~€18 |
| Market test | €5.60 < €18, fails |
Every lead this company buys at market price costs three times what its margins allow. The finding is not "spend less"; it is that advertising is the wrong purchase this quarter. The €18 lead becomes affordable when the inputs change: raise prices toward €220, measure and grow the repeat rate so year-one value rises, or lift the close rate. Any one of the three moves the allowable figure past the market figure. Then, and only then, run the arithmetic again and buy ads.
Why it works
A percentage-of-revenue budget imports another business's economics; the margin-back budget uses the client's own numbers, which means the client can check every step and owns the conclusion. The market test is the part that builds trust: an agency whose budgeting method sometimes says "do not hire us yet, fix your prices first" is making a claim about its other recommendations too. And because the method ends by checking the spend floor, the two frameworks bracket the budget conversation completely: what the business can afford, and what the machine needs, in that order.
Who this is for
The same method, read three ways.
01
Running it
Contribution per customer, a chosen share of it, the close rate, then capacity. Five steps and the last one is a market test the account can fail before a euro is spent.
02
Teaching it
Unit economics arriving as a marketing decision rather than a finance one. The market test is the teachable moment: a method that sometimes concludes "do not advertise yet" is the only kind a sceptic believes.
03
Pricing your offer
Your price and your close rate decide what a lead may cost, and therefore whether you can buy customers at all. If the arithmetic fails, fix the price or the close rate first.