If you are a business owner, answer these questions first…
Which of these sounds like your business?
You get your monthly ad report from Google and Facebook. The numbers look great with tons of clicks, impressions, and a hefty bill.
But when you check the sales figures, the math doesn’t add up. You were spending money you could barely afford, gambling on a system you didn’t fully understand, while your competitors seemed to be everywhere.
You’d boost a post on Instagram when sales were slow or run a small ad when you felt pressure. There’s no fixed plan, no budget, and no way to know what worked. It’s like throwing money and hoping it works.
Notice what’s missing in both situations?
An advertising budget.
And no, a marketing budget is different from an advertising budget.
Read the full article to understand an advertising budget and how to build one that works for your business. Let’s fix your ad spend the smart way.
An advertising budget is money you set aside specifically for paid ads. It’s a part of your bigger marketing plan, often a key component of your overall promotional budget.
It’s super important to know exactly how much you’re spending on these ads so you can control your spending well.
An advertising budget covers everything, from coming up with the ad idea to actually putting it out there, which includes ad space, creating the ads, people power, tools, and research.
Here’s how it helps:
With a budget, you decide exactly how much you’re spending to promote your business, so you don’t accidentally overspend or underspend. This keeps your finances stable and helps you take small risks and test new ideas.
A budget helps you get more sales and more people to know your brand. An ad budget helps you spend money specifically to reach those goals. You’ll know exactly where every rupee is going and what result to expect.
When you budget, you can track what’s working in ads and where your money is making the most impact. This way, you can put more on ads that bring results, boosting your return on investment (ROI).
Even a small, regular ad spend keeps your brand visible in front of your customers. This builds trust, and it’s better than spending a lot once in a while and disappearing in between.
With a budget, you can actually track your ad spend and results. This helps you make decisions about your ads and makes sure your team, whether in marketing or finance, is on the same page about how you’re spending money to grow.
So you’re on board with the ‘why. But if you’re feeling overwhelmed about where to even begin, figuring out the ‘how’ is what truly helps separate struggling businesses.
There is no fixed budget that works for all businesses. Your ideal advertising budget depends on your business needs, your goals, and market changes.
Your advertising budget should align with what you want to achieve. If you’re launching something, you’ll need to spend more on ads. If you just want to keep your place in the market, you might spend less.
If your business is new, you’ll need 10-20% of revenue on ads to build your name, and if you’re already established, you’ll need 5-8% of revenue for customer retention.
The more profit you make, you can put into ads. If margins are tight, you need to be careful. Basically, your finances impact your spending limit.
What you sell matters too. If you have high-value products or services, then you need longer, focused ad plans, and if you have Low-cost products or services, you’ll need to do broader campaigns to reach mass.
If your market is packed with competitors, you’ll need to spend more to stand out. It also helps to look at what competitors are doing to see what’s needed to compete.
If your customers are a very specific group, a focused, smaller budget can work. If you’re trying to reach a very broad audience, you’ll need to spread your budget wider.
Consumer behaviour, inflation or slowdowns can affect how much people buy. A flexible budget helps to adapt quickly to these shifts.
When your product or service is most in demand, like in festivals or holidays, you should spend more and save money during slower periods.
Without any proper direction, deciding how much to spend on advertising can feel confusing. The method you choose depends on where your business is right now and where you want it to go. Let’s look at five popular methods of advertising budget.
Set aside a fixed percentage of your total sales revenue for advertising. This percentage can be on last year’s sales or what you expect this year.
How to calculate?
Formula: Advertising Budget = Total Sales × Desired Percentage
General Guide for You to Divide Your Budget : (Percentages Can Vary!)
First, decide what result you want, and then list what advertising tasks you need to do to hit that goal and add up the cost. The cost will be your budget.
In this method, you check what your competitors spend on advertising and try to match it so your brand doesn’t get left behind.
In this method, you pay all bills first, and then you use whatever money is left for advertising.
Profit-based models include two different methods. These are more advanced types of advertising budget models where your budget is based on the value of a customer and your profits. This method uses data to guide your budget.
Based on these numbers, you decide how much you will invest to bring in more.
Set aside a percentage, like 10–30% of your gross profit, for ads. The spending amount can change as you make more profit.
In these methods, you need to track the numbers of LTV, CAC, and profit well to make a budget, and sometimes, you might need to spend a bit more upfront to get new customers.
I often see business owners struggle with their advertising budget.
It’s a common challenge!
But it’s really about making sure the money you spend helps you achieve your business goals. With a few simple steps, you can make decisions that help your business grow.
Let’s talk about a few easy steps that you can use to plan smartly without stress. This is the advertising budget process.
Figure out exactly what you want your advertising to achieve.
For example –
Use the SMART method and make your goal clear and specific. SMART means – Specific, Measurable, Achievable, Relevant, Time-bound.
Look at your money situation. Check your income and cash flow. Check what worked in past ads and what didn’t. It helps to avoid the same mistakes.
After that, analyse how much cash you have and how much you can really spend.
In this step, create a picture of your ideal customer.
Furthermore, analysing what your competitors are doing, you don’t have to copy them. It helps you see what’s happening in your market and how you can stand out.
Check –
Decide where you’ll advertise and choose the best ways to reach your customers, like whether you’ll do Digital ads on Google, Facebook or Instagram, or you want to do content on blogs, videos, emails to connect with your audience or want to do local events, partnerships, etc.
The smart approach you can take is investing money and efforts 70% on what’s working for you, 20% on trying new ideas and 10% on experimental initiatives.
Finally, it is important to assign specific amounts of money to each advertising channel. Make a simple budget sheet, maybe on Excel or Google Sheets or any other budgeting tool available.
Set aside a 5-10% extra amount for unexpected expenses.
By formalising the budget like this, you can maintain financial discipline for your advertising and make sure that your advertising efforts remain on track.
Following these steps will put you way ahead of your competitors. But you can turn these steps into a repeatable system that frees you from the daily chaos with expert guidance. Here’s your next step.
This is an important step. Many times, business owners create an advertising budget and then forget about it, but that’s a big mistake.
You need to keep checking if you are aligned with it or not, and also keep adjusting it if needed.
How to Set Up Your Tracking?
You don’t need expensive software to track your budget. Many great tools are free or cheap:
By this time, you know that a clear budget helps turn your big dreams of growth into real, doable steps. Don’t wait to create the “perfect” budget. The most important thing is to start now.
It helps you clarify your goals, decide where to put your money, and build a solid plan to stay strong against competition.
So, start today with a simple budget plan and stick to it.
You’ve mastered the budget, now what? read more blogs to learn smart marketing, lead generation, customer retention and business growth to keep your momentum going.
None can destroy iron, but its own rust can! Likewise, none can destroy a person, but their own mindset can.
Former chairperson of the Tata Group
800K+
350K+
300K+
80K+
Be the first to receive any new updates
© Copyright Quantum Leap Learning Solutions Pvt Ltd
