Every list of low-cost marketing tactics is the same list. Content, email, referrals, partnerships, communities, PR. The tactics are not the hard part and never were — a founder can name all eight without reading anything.

What actually decides whether lean marketing works is arithmetic that almost none of those lists contain: what one customer costs you to win, how long you wait to get that money back, and what a marketing pound really costs after Corporation Tax. Get those three numbers on paper and the choice of channel more or less makes itself. Get them wrong and you can run a textbook-perfect campaign straight into a cash crisis.

The only marketing number that matters early: payback

Not return on ad spend, not cost per click, not impressions. Payback period — how many months of a customer's contribution it takes to repay what you spent winning them. It matters more than the others because a pre-revenue company dies of running out of cash, not of a poor return on investment. A campaign with a superb lifetime return and a fourteen-month payback will kill a company with four months of runway.

Three inputs, and you need all three:

  • CAC — total spend on winning customers in a period, divided by the customers won in that period. Everything counts: ad spend, tools, freelancers, and any of your own time you actually pay for.
  • Contribution per month — price less the direct cost of serving that customer. Not revenue. Revenue flatters everything.
  • Expected life — how many months a customer stays. Early on you are estimating; estimate conservatively and revisit it every quarter.
Worked example one — illustrative figures. A startup selling a £95-a-month service, costing £19 a month to deliver, so contribution is £76 a month.
• It spends £900 on ads in a month and gets 300 clicks at £3.00.
• 8% start a trial: 24 trials. A quarter of trials convert: 6 customers.
• CAC = £900 ÷ 6 = £150.
• Payback = £150 ÷ £76 = 2.0 months. At an average life of 20 months, lifetime contribution is £1,520 against £150 of cost — about 10:1.
That is a channel worth feeding. Now change one number: trial-to-paid drops from 25% to 10%, so 24 trials become 2 customers. CAC jumps to £450 and payback to 5.9 months. Same ads, same clicks, same spend — a conversion rate moving by fifteen points turned a two-month payback into a six-month one. This is why founders who only watch cost per click are flying blind.

A rough rule that holds up well at this stage: if payback is under three months, spend more; between three and six, spend carefully and watch cash; over twelve, stop and fix the funnel before adding a pound. The fix is almost always conversion or retention, not traffic. Doubling traffic doubles the cost. Doubling conversion is free.

What a marketing pound actually costs you

Marketing is an allowable deduction against trading profit, so a profitable company never bears the full sticker price. For the financial year starting 1 April 2026 the Corporation Tax rates are unchanged: 19% on profits up to £50,000, 25% above £250,000, and marginal relief in between, which produces an effective marginal rate of 26.5% on each extra pound of profit inside that band.

Worked example two — the same £900, three different companies.
• Profits of £40,000 (19%): the £900 saves £171. Net cost £729, so real CAC is £121.50, not £150.
• Profits of £120,000 (26.5% marginal): the £900 saves £238.50. Net cost £661.50, real CAC £110.25.
• Pre-profit and loss-making: nothing back this year. The £900 increases the trading loss, which carries forward against future profits — real, but it is relief you collect later, and it does nothing for this month's bank balance.
The lesson is not "spend more because it is deductible". It is that the loss-making startup pays 36% more in cash for the identical campaign than the one in the marginal band, and should therefore be far more ruthless about payback.

Three tax traps that make cheap marketing expensive

1. Overseas ad spend counts towards your VAT threshold

Google and Meta invoice UK advertisers from Ireland. The invoice shows 0% VAT and an Irish billing address — which is not an exemption, it is the signal that the reverse charge applies and that you, the customer, account for the VAT.

Here is the part that catches people. HMRC's registration guidance is explicit that your taxable turnover for the £90,000 registration threshold includes services you received from businesses in other countries that you had to reverse charge. Your own sales are not the whole test.

Worked example three — illustrative figures. A startup bills £78,000 of UK sales over twelve months and spends £14,000 on Google and Meta ads in the same period.
• Sales alone: £78,000 — comfortably under the threshold, and the founder is not thinking about VAT at all.
• Taxable turnover for the threshold test: £78,000 + £14,000 = £92,000. Over the £90,000 line.
• The registration obligation is triggered, and a late registration means VAT owed on past sales the company never charged for, plus a penalty.
For a startup scaling ad spend fast, this arrives earlier than expected and from a direction nobody is watching. Our VAT guide for startups covers the mechanics and the timing rules.

2. Client entertaining is never deductible

Not the lunch, not the drinks, not the box at the match, not "event hospitality". It is disallowed for Corporation Tax outright, and the input VAT on entertaining UK business contacts is blocked from recovery as well. A £400 client dinner costs £400 and reduces your tax bill by nothing. Staff entertaining is treated differently — VAT on entertaining employees is recoverable, and there is a separate annual events exemption for staff — but entertaining a customer is a marketing cost you fund entirely out of taxed money.

3. Business gifts have a £50 ceiling and a strict test

A gift is deductible only if it costs no more than £50 per recipient per accounting period and carries a conspicuous advertisement for your business on the gift itself, not merely on the wrapping. Food, drink, tobacco and vouchers exchangeable for goods are excluded no matter what they cost or what is printed on them.

So a £18 branded notebook is allowable. A £18 bottle of wine is not, because it is drink. A £60 branded jacket is not, because it breaches the ceiling — and it fails for the whole £60, not just the £10 excess. Two £30 branded items to the same client in one year also fail, because the limit is cumulative per recipient. Founders reach for gifting precisely when cash is tight, which is the worst moment to discover the cost is entirely post-tax.

The eight routes, ranked by what they cost you

With the arithmetic in place, here is the standard list — with the honest cost attached to each.

  1. Referrals, deliberately asked for. Lowest CAC of anything, and referred customers convert faster and stay longer, which improves both sides of the payback sum at once. It costs a habit: ask at the end of every good job, every time.
  2. Partnerships. Find businesses serving your customers who are not competitors and cross-refer. Near-zero cash cost, and one good partner can outproduce months of cold outreach. The risk is the mirror image of the reward — leaning on one partner recreates the concentration problem investors ask about first.
  3. Email. Social platforms rent you an audience; a list is one you own. Capture addresses from the first week — the list you wish you had is always the one you started eighteen months ago. Watch the marketing rules: sole traders and ordinary partnerships count as individuals under PECR and need consent or a soft opt-in, while limited companies and LLPs do not.
  4. Content and search. No cash cost and a real time cost. One genuinely useful piece a week beats ten and then silence. It compounds slowly and then does not stop, which is the opposite shape to paid ads.
  5. Google Business Profile. Free, and the fastest win available to anything serving a local area. Complete every field, then ask for reviews properly.
  6. Showing up where your customers already are. Communities, trade forums, local groups, industry Slacks. Costs hours, converts well, and cannot be automated without becoming worthless.
  7. PR and being quotable. Journalists need sources on deadline. Respond fast with something genuinely useful and you earn coverage and links no budget of yours could buy.
  8. Paid ads. Last, deliberately. Ads are the only route on this list that stops the day you stop paying — and the only one that can drag you over the VAT threshold. Use them once you know your payback number, not to discover it.
Pick two and do them properly The failure is almost never choosing the wrong channel. It is spreading across all eight, doing none of them consistently, and having no idea which produced the four customers you won. Two channels, run weekly for a full quarter, with the source of every enquiry recorded — that is the whole discipline.

What to do this week

  1. Work out your CAC for last quarter. Total spend on winning customers, divided by customers won. One line, and most founders have never written it down.
  2. Work out contribution per customer per month — price less the direct cost of delivery. Divide CAC by it. That is your payback in months, and it decides whether you spend more or fix the funnel.
  3. Add up twelve months of Google, Meta, LinkedIn and overseas software invoices, add it to your UK sales, and compare the total with £90,000.
  4. Start recording the source of every single enquiry, even if it is a column in a spreadsheet. Without it, CAC by channel is guesswork forever.
  5. Check your gift and entertaining spend against the rules above before it lands in the accounts as an allowable expense that is not one.
  6. Put your marketing spend into your cashflow forecast as a monthly line, not an annual guess. A four-month payback is only survivable if the runway is longer than the payback — see our runway and forecasting guide.

Where we come in

Which channel to run is your call. What a customer costs, what one is worth, how long the payback is, and what you can safely afford to spend before the cash gets tight — that is a numbers question, and it is the one that gets skipped. We build the reporting that puts CAC, contribution and runway in front of you monthly, and we keep the VAT threshold and the disallowable lines from turning into surprises. Fixed monthly fees, no surprises — see what it costs. Get started.