TL;DR
Most founders spend on lead generation without knowing their numbers. The right budget starts with math, not guesses. Know your CAC, know your LTV, and let the ratio decide what you can afford. Spending without those numbers is just burning cash.
A founder asked me last week how much he should be spending on lead generation.
“What does your CAC look like?” I asked.
Blank stare.
“Okay, what’s your customer lifetime value?”
Another blank stare.
“So you’re just… spending money and hoping it works?”
“Well, our competitors seem to be running a lot of ads, so…”
This is how companies burn through millions in funding while their CFO quietly updates their resume.
Here’s what nobody teaches founders about lead generation budgets: it’s not about what you can afford to spend. It’s about what the math says you must spend to hit your revenue goals.
The companies scaling predictably in 2025 aren’t guessing at marketing budgets. They’re running the numbers, understanding their unit economics, and making data-driven decisions about customer acquisition. Meanwhile, their competitors are lighting money on fire because “everyone says we need to be on LinkedIn.”
Let me break down the framework that separates the winners from the wishful thinkers.
The CAC-LTV Framework: Your New Religion
Customer Acquisition Cost (CAC) is exactly what it sounds like: the total cost to acquire one new customer. This includes your entire marketing and sales spend divided by the number of customers acquired in that period.
Simple formula: (Total Sales + Marketing Spend) / Number of New Customers = CAC.
If you spent $100K on sales and marketing last quarter and acquired 50 customers, your CAC is $2,000.
Customer Lifetime Value (LTV) is the total revenue you expect to generate from a customer over the entire duration of your relationship with them.
Basic formula: (Average Purchase Value × Purchase Frequency × Customer Lifespan).
If your average customer pays $500/month and stays for 24 months, your LTV is $12,000.
Here’s the critical part: your CAC should ideally be around one-third or one-fourth of your LTV. This creates a 3:1 or 4:1 LTV:CAC ratio, which means for every dollar you spend acquiring a customer, you’re getting three to four dollars back over their lifetime.
If you spent $100 to get a customer and that customer spends $600 total over their life with your company, you have a 6:1 ratio. That’s not just healthy, that’s a money-printing machine.
What Should You Actually Be Spending?
SaaS businesses allocate an average of 7–15% of their annual revenue to marketing activities, but this varies dramatically based on your growth stage and funding situation. High-growth VC-backed SaaS companies often spend 10–20%+ of ARR on marketing because they’re optimizing for growth over profitability. They can afford to operate at a loss while building market share.
Traditional wisdom suggests combined Marketing and Sales budget should be 30–50% of revenue, with company stage and size being primary variables.
But here’s what matters more than industry averages: your unit economics. If your LTV:CAC ratio is 6:1, you can afford to spend aggressively on acquisition because the math works. If your ratio is 1.5:1, you’re bleeding money with every customer you acquire, and spending more on marketing is just accelerating your death.
The Real Numbers: What Does CAC Look Like?
Consumer-focused SaaS has much lower CAC, with most companies under $300. Small and middle-market B2B SaaS often ranges from $300 to $5,000, depending on sales complexity. Enterprise tools can see CACs well above that, with $9,000 acquisition costs being acceptable if the customer is worth $100,000 over time.
The question isn’t “is my CAC too high?” The question is “does my LTV justify this CAC?”
A $10,000 CAC for an enterprise customer with a $150,000 LTV is phenomenal. A $500 CAC for a consumer subscription with a $400 LTV is a disaster waiting to happen.
Where to Actually Spend Your Lead Gen Budget
Once you’ve done the math and know what you can afford to spend, here’s how to allocate that budget effectively. Paid search should take 25–35% of your lead gen budget, it’s still the highest intent channel. People searching for solutions are closer to buying than people scrolling social media.
Content marketing and SEO should take 20–30%. It’s the long game that pays dividends. Every piece of content you create becomes a perpetual lead generation asset that keeps working long after you publish it.
Paid social should sit around 15–25%. LinkedIn for B2B, potentially Facebook or Instagram for B2C or prosumer SaaS. Use these channels for awareness and nurturing, not immediate conversions, the ROI is slower but the targeting is powerful.
Email marketing and automation should be 10–15% of your spend. It’s your highest ROI channel for prospects already in your database, and marketing automation platforms pay for themselves many times over.
Finally, outbound sales development should take 20–30%. For B2B companies selling to enterprise or mid-market, SDRs often deliver the most qualified pipeline. Yes, it’s expensive. It’s also predictable and scalable when done right.
The Shift
Stop treating marketing budgets like a discretionary expense. Your lead generation budget should be a direct function of your revenue goals, your CAC, and your LTV.
If you need to close 100 customers next quarter, and your CAC is $5,000, then you need to allocate at least $500K to sales and marketing, probably more to account for conversion rates and sales cycle length.
This isn’t guesswork. It’s math.
The companies that understand this are scaling predictably. The ones that don’t are constantly surprised by their cash flow problems while wondering why “marketing isn’t working.”
Your Next Move
Calculate your actual CAC and LTV this week. Not estimates, real numbers from your P&L. Then divide LTV by CAC.
If that ratio is below 3:1, you have a unit economics problem that more marketing spend will only make worse. Fix your conversion rates, increase your prices, or improve retention before you pour more money into lead gen.
