Advertising Budget

How to Set an Advertising Budget for Your Small Business

Are you planning to invest in Advertising Budget?

Over 30 million small businesses in the United States. As such, effective marketing is a must to distinguish yourself. The problem is the lack of funding, especially when you only started recently a Advertising Budget.

If you have no idea where to start, consider looking for an advertising budget example. It allows you to make the most out of your investment.

Read on as we provide an example as well as tips to begin your marketing campaign:

Advertising Budget Example

Is your business making less than $5 million every year? If so, the recommended budget is 7% to 8% of your gross revenue. It ensures your net profit margin is within 10% to 12% even after expenses.

However, the reality is most small businesses spend only 3% of their revenue. It’s a more common practice for start-ups due to their limited budget. Regardless, your spending depends on how competitive your industry is.

The average small business earns over $71,000 every year. As such, your advertising budget should be around $2,130. However, if you are in a competitive industry, consider spending $7,100.

How to Make a Small Business Advertisement Budget

The example above is a more general approach to budgeting your advertisement funds. However, this section will give in-depth advertising ideas for your small business.

Consider the Big Picture

Your budget is an essential component of your small business advertising campaign. Its importance remains consistent at any stage. However, discovering your current situation allows you to make a more informed decision.

A small business will either be a start-up or running. Your category will affect the amount necessary for your marketing budget. As a general rule, you’ll spend more money on the former.

For example, you have a restaurant and live in an area with lots of competition. The best way to advertise a small business in this niche is to make a recognizable logo. It makes your brand identity more concrete.

Outline Your Sales Funnel

Your small business sales funnel maps the necessary steps for customers to buy your products or services. It’s critical since it makes you understand your customers more.

Once you outline your sales funnel, you’ll discover how customers find your business. It also determines the primary factors contributing to their final decision. You can use these to learn what they need to know before supporting your business.

After getting past the start-up stage, consider mapping out every client’s sales funnel. Doing so allows you to notice the most effective sales and marketing tactics around.

Discovering these will determine whether to expand your advertising budget.

List Your Operational Expenses

This step is more straightforward than most budgeting methods on this list. Start by making a spreadsheet or template and put your current and expected operational fees.

These may include the following:

  • Content outsourcing fees
  • Sales tax
  • Web hosting

List every possible cost necessary for your business to run. Once done, you can paint a more realistic picture of your advertising budget. The information enables you to make and stick to a budget.

Set Your Business Goals

Determining your current business phase, sales funnels, and operational costs allows you to set objectives. Answer the following questions and see whether your budget and goals are complementary:

  • What is your ideal revenue?
  • How many sales is necessary?

Calculate the number of leads to convert before achieving the ideal number of sales. Once you do, look at the percentage before leads become conversions.

After setting your goals, make a system to track your current progress. When spending on anything, always think about your ROI. Consider researching your competitors to discover more high-ROI marketing methods.

Scout Your Competition

Understanding your niche is a must before you can set a marketing budget. Track your top competitors and learn from their marketing campaigns. Check the primary players and outline their best practices.

Are they using physical marketing methods over PPC management for small businesses? Do they invest in all marketing platforms?

For example, you might observe your competitors use social proof and printed materials for business advertising. You will narrow down the best methods for your business after testing these tactics.

Make Your Marketing Plan

All the steps above will culminate into making the advertising plan. It will equip you with a firm understanding of your current and future business situation. 

Use the information gleaned from prior tips to determine the number of necessary funds to achieve your goals. After that, think about the best advertising tools to promote your business.

Finish fleshing out your advertising plan by understanding how customers want you to market to them. Checking everything off your list will make your budget creation a lot easier.

Why Make an Advertising Budget?

It’s tempting to avoid spending money on advertising. After all, stumbling through various marketing tactics can be overwhelming. It becomes more apparent when you already have lots of business expenses.

However, having a dedicated advertising budget has lots of benefits. It gives a clear direction when managing your advertising efforts. If you have scarce resources, you can allocate them more efficiently.

A budget also enables you to determine the success of your results. You can compare the amount you spent on advertising to your revenue. 

With a concrete idea of your budget, you can better determine the best marketing avenues. It maximizes your marketing ROI and makes your small business more successful than ever.

Also, having a solid budget encourages coordination and planning. It’s more critical when your business has various departments like finance and operations.

Learn How Much to Spend on Ads Now

These are some tips to manage your advertising budget. Never let your lack of knowledge stop your business progress. Use the advertising budget example above as a basis for your efforts. 

However, making a budget is only the start. Consider collaborating with a reputable advertising agency to maximize your returns. Look at online reviews and do your due diligence to avoid scams.

Did you find this guide helpful? If so, consider exploring our other posts today.

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