The rest of the advice here is all applicable but I'll chime in my experience...or more accurately my sons.

He was spending between $10 to $12k per month on PPC. He asked me to look at it and offer suggestions. About 30% of his orders come from new customers. That's important because there's no cost involved in the orders from the 70% that become regular customers.

I suggested he there would probably be a momentum effect involved in the advertising and to test it he should turn off all advertising for 30 days. The orders dropped off by 3%, and the NP fell by $1,200.

This meant he was netting an additional $8,800 to $10,800 a month. I then got him to extend it to 60 days off, and 90 days off. The second month the sales fell by 5% and the NP accordingly. In the end, we decided that he'd advertise for 4 months, turn it off for 2, on for another 4, and off for 2 again. Right off the top it added almost $50k to his bottom line without any significant loss of business.

If your advertising is effective you should be able to be high enough in the natural search after a year that you should be able to spend a lot less on PPC.

I'm not sure how the whole search and PPC works but I'm suspicious. The website I put up for my company is nearly a clone of my sons. While he's totally internet, it's just a small part of my company's busines. To establish the site I budgeted $4k/month to PPC. For a year, you'd have been hard pressed to find me in the top 500 or more. About 4 months ago, I cut the budget down to about $500/ on just a couple of ads...all of a sudden, I come up anywhere from 1 to 4 in a natural search. Given what's happened I can't help but think that somehow the alogrithms were keeping me down in the natural to get me to spend more for PPC to be number 1 to 3...and when I quit spending, I just went into the natural search naturally so to speak. I'm no SEO expert so you can take it for what it's worth but that has been my experience.
Hope this helps...