You can’t just throw money at ads and expect to get results. Instead, it’s important to justify every penny you spend on digital marketing of your business, which is where having a dedicated advertising budget comes into play.

Marketing works wonders and online advertising is something that businesses spend or set aside a considerable amount from the overall budget. Be it for B2B companies, B2C companies, or any other type of business, it is important to make marketing investments, know how much to spend, and allocate strategically according to advertising channels and campaigns.

Deciding where to pitch your outlay, or allocate a marketing budget is a struggle for many smaller companies. So here are some tips that will make it easier for you.

Tips to allocate an Advertising Budget for Small Businesses

You probably might have found various ads on social media channels and have maybe even purchased a product or service. Advertising and marketing campaigns when done right can boost your ROI. But that does not mean you need to invest a huge sum into your marketing.

But sometimes it happens that these ads do not generate revenue as expected, or bring in new customers. Such underperforming market strategies can be an issue in conducting business.

To foster the expansion of your business, devise and formalize your small business marketing budget while ensuring that each advertisement expenditure is linked to increased revenue and profits.

The tips that you will read in this blog will help you, especially if you are a marketer or small business owner, execute your marketing or advertising in a cost-effective manner. 

Don't rush into It!

Rather than rushing into dealing with the minutiae of your individual marketing needs, begin with an all-encompassing evaluation of where your business stands right now and where you’d like it to be.

For instance, if you’re currently a fresh, fledgling firm looking to grab a slice of a market you’ve yet to master, it’s important to recognize that this will involve spending proportionally more on advertising than if you’re already established in your chosen niche.

This is also a good point at which to set your priorities, especially in the case of start-ups. If you can work out what will help maximize the visibility of your brand and bring those first customers on board, you can then prioritize your spending accordingly.

Establishing a sales funnel will help here. If you know that social media is driving customer awareness, you can give this your full attention. If it’s instead print ads in the local media which will gain the most traction, you’ll have more information on to base your budgeting decisions.

For established companies, there might be multiple points of entry to your sales funnel, even if they all lead to the same endpoint. In this case, you should look at which initial phases are creating the highest conversion rates and weed out weaknesses if any exist.

Consider other Expenses

Your advertising budget can’t exist in isolation but must be weighed up alongside the other costs that come with running your business.

Looking at the expenses associated with your operations, whatever they might be, will let you work out what you can really justify spending on your marketing efforts.

This could include building and maintaining a website, renting commercial premises to house your headquarters, covering employee salaries, and so forth.

Having all this info to hand will avoid the scenario in which you either over-commit to advertising or simply don’t put aside enough cash to take care of it in comparison with other expenses you’re shouldering.

Focus on the Results

Your advertising budget will be wasted if you aren’t generating a sufficient return on your investment. There’s no way of knowing if you’re having an impact if you aren’t also tracking key metrics and making use of paid media performance marketing alongside organic equivalents.

If your campaigns are making a positive impact, you need to know about it so you can learn why it is that you’ve succeeded. If they aren’t performing as expected, you must scrutinize the stats to unpick exactly what the problem might be.

Most importantly, performance marketing is efficient. You’ll know how each conversion was achieved, what it cost to win the customer over, and whether the ad spending was worth it.

Keep an Eye on the Competition

We’re not saying that it’s wise to copy exactly the same advertising tactics as your closest business rivals, but it is undeniably helpful to look at what others in your niche are doing.

You might see that a competitor is having great success with its promotional campaigns on a particular platform, for example. This might suggest that this is either a route you should take as well or one you should avoid because it’s already oversaturated.

On the other hand, you might find that there are advertising options that other companies target the same market as you have yet to use. This could be an opportunity or an indicator that a particular platform for promotion simply doesn’t work in your industry.

Essentially you can afford to take inspiration from rivals and even assess how your budget stacks up to see if it is in line with industry averages.

Choose Goals to work Towards

There are various targets you can choose to hit with your advertising, such as:

  • Boosting online sales by a set percentage
  • Generating a specific proportion of new leads
  • Increasing social media mentions and engagement within a specific range
  • Enhancing footfall at your bricks and mortar stores over a given period

It doesn’t matter what these aims might be, so long as you choose them and build your budget around them. That way you’ve got a means of measuring the effectiveness of each campaign, and you can also calculate things like customer acquisition costs.

Explore the Tools you’ll Use

The multifaceted nature of modern advertising means that the range of tools available to professionals in this field is extensive.

Specifically, there’s software to handle every aspect of digital marketing, including:

  • Email marketing platforms
  • Customer relationship management services
  • Keyword research tools
  • Search optimization solutions
  • Social media marketing systems

Many of these tools come at a cost, and there has to be room in your budget for the ongoing expenses these generate, as well as the one-off price you’ll pay for running a particular campaign for a product launch, for example.

You need to reflect on the cost of each tool and the relative influence it has over revenue generation. If a platform isn’t pulling its weight, then it will be wasteful to continue paying for it.

Investigate Outsourcing Options

Small businesses in particular are in a position where they stand to benefit more from outsourcing certain responsibilities to third-party experts.

This is interesting from an advertising perspective since if you can balance costs to keep the quality of your campaigns up without needing to hire a full-time team member to fulfill certain duties, it’s worthwhile.

It doesn’t make sense to outsource everything, and sometimes the cost of doing so will be higher than handling it internally. Even so, being aware of this possibility will push you closer to taking advantage of it in the right circumstances.

Test Strategies

If you are still on the fence about how much of your budget you should be spending on a particular advertising platform or category, take it one step at a time.

So in the case of potentially branching out onto a new platform, dip your toes in the water with smaller-scale efforts, study their effectiveness and then gradually increase your investment if it pays off. Starting small and building up is better than throwing everything you have at a platform or campaign only to find that it misses the mark.

You can make use of various marketing channels including social media platforms like LinkedIn, TikTok, etc., and analyze measurable stats like views, clicks, etc. This will help you understand where to improve, what works, and what doesn't. It will also help you know how much time and resources to use, where you can save costs, revenue status, etc.

Are you Ready to plan your Advertising Budget?

There is no single answer to the question of how much you should spend on marketing your business. We recommend doing experimentation with various strategies and finding out what works better for you. Even if you are following traditional advertising methods, you should be able to drive analytics and set aside funds to achieve your marketing goals.

That said, you can still be methodical and calculated in your approach, and with the help of modern tools, it's less challenging to check up on your strategies to see if they hold water. We hope these best practices and tips mentioned above help you in advancing your marketing plan and refining your marketing costs.

But do keep in mind that the average marketing budget for small businesses varies and so your marketing spend needs to be taken care of according to your marketing initiatives and goals.

So what are you waiting for? Get down to the brass tacks of budgeting and the benefits will come flooding in. To know more about marketing, boosting your online presence, generating leads, and leveling up your business marketing, feel free to contact us.

Frequently Asked Questions

Your marketing budget is typically a percentage of your income. For B2B firms, it's commonly 2-5% of revenue, while B2C firms often allocate 5-10%.

The right budget for your marketing depends on your current marketing setup. In general, experts and research suggest allocating 2-5% of your sales revenue to marketing.

To budget for advertising effectively, you need to know the ins and outs of your advertising's quality and quantity. You can use different methods for budgeting, like setting a percentage of your sales, matching your competitors' spending, defining your objectives and tasks, or using the Dorfman-Steiner Theorem.

An advertising budget is the money allocated for promoting a product. Its purpose is to reach potential customers, boost sales, and generate profits for the company.