You’ve set up an ad campaign, but how much should you actually spend? Too little, and no one sees your ad. Too much, and you might burn through your budget with no results. So, how do you strike the perfect balance? This guide will help you determine the best budget for your business and maximise your ad spend.
1. Define Your Advertising Goals
Before setting a budget, you need to understand what you want to achieve. Common digital advertising goals include:
Brand awareness – Increasing visibility and recognition.
Lead generation – Getting potential customers to sign up or inquire.
Sales and conversions – Driving purchases or bookings.
Customer retention – Re-engaging existing customers.
Your goal will impact how much you should spend and which platforms will be most effective.
2. Understand Industry Benchmarks
Every industry has different advertising costs. Looking at industry benchmarks can help you set realistic expectations. For example:
The average cost-per-click (CPC) for Google Ads ranges from $1 to $6, depending on the industry.
The average cost-per-click (CPC) for Facebook Ads is around $0.97.
On average, small businesses allocate 5-12% of their total revenue to marketing, with a large portion going to digital ads.
Researching typical costs in your industry can help you determine how much budget you need to be competitive.
3. Choose the Right Ad Platforms
Your budget will also depend on where you advertise. Different platforms have different pricing models:
Google Ads – Best for high-intent searches but can be expensive.
Facebook & Instagram Ads – More affordable and great for audience targeting.
LinkedIn Ads – Ideal for B2B businesses but has a higher CPC.
YouTube Ads – Great for video engagement but requires strong creative content.
4. Start Small and Scale Up
Instead of committing a large budget upfront, start with a smaller test budget and track your results. A good starting point for small businesses is $500 to $2,000 per month, depending on your goals and industry.
A simple budgeting formula: If your product costs $100 and your conversion rate is 5%, you need at least $500 in ad spend to effectively test results.
5. Track Key Performance Metrics
To make sure your budget is being spent effectively, monitor these key metrics:
Cost-per-click (CPC): The price you pay for each click.
Cost-per-acquisition (CPA): The cost to acquire a new customer.
Return on ad spend (ROAS): Revenue generated for every dollar spent on ads.
Click-through rate (CTR): How often people click on your ad after seeing it.
6. Adjust Your Budget Based on Performance
If your ads are generating high engagement and conversions, increase your budget to scale up results. If an ad isn’t performing well, pause it and reallocate your budget to higher-performing campaigns.
Setting an effective digital advertising budget isn’t about spending the most money—it’s about spending wisely. Start with clear goals, research industry benchmarks, track performance, and adjust based on results. With the right approach, you can maximise your ad spend and achieve real business growth.