Putting together an advertising budget for your business is tricky. You want to spend enough to reach potential new customers, but not so much that you waste your hard-earned dollars. This post will walk you through the key steps to build a budget that really works.

Set Concrete Marketing Objectives

Before determining budget numbers, get clear on what you actually want your ads to accomplish. Do you want them to spark new sales? Generate more leads? Increase brand awareness? Define your goals upfront. For example, maybe you want to “land 100 new customers this quarter.” Quantifiable goals like this make it easy to tell if your budget hits the mark.

Research Advertising Costs

Now that you’ve got your objectives, do some digging to see how much ads cost for your industry. A quick Google search can give estimates for pay-per-click and display ads. Check industry reports for typical digital marketing budgets. For traditional ads, call up print and TV outlets to ask for their latest rate cards.

Gather intel on minimum spends too, which vary wildly. This homework gives you realistic cost expectations before plugging in budget numbers.

Benchmark Against Competition

Research what competitors in your industry are spending on advertising. Look for publicly available data on their ad budgets as well as estimates from market research reports. 

You can also use tools like SEMrush and SpyFu to analyse competitors’ spending on search, social, display, and other digital ads. Examine factors like their monthly ad impressions, top keywords, social audience size, etc. 

Benchmarks vary greatly by industry, so focusing on competitors in your niche provides a relevant comparison for determining an appropriate budget. If your ad spend is far below competitors, you may struggle to enter the consideration set of your target audience.

Factor in Seasonality

Take into account revenue fluctuations and seasonality trends when building your advertising budget. Some businesses see spikes in sales during holiday seasons or summer months, for instance. 

Set higher advertising budgets to fuel growth during peak periods, and lower budgets during slower periods to conserve resources. Look back 2-3 years at your sales cycle trends to forecast seasonal needs. 

Ongoing optimization allows you to adjust budgets up or down quickly based on performance. Ideally revisit your advertising budget monthly or quarterly to align investments with seasonal shifts.

Develop Monthly and Yearly Budgets  

Your overall annual budget should be informed by your marketing objectives, competitive landscape, and seasonal needs. From there, break it down into monthly or quarterly budgets.

Allocate different parts of your budget to specific campaigns and initiatives running at various times throughout the year. Ensure your annual budget is appropriately distributed based on performance data from previous years.

Building 12-month budgets allows you to plan campaigns and performance targets well in advance. It also helps ensure you don’t blow through your entire budget too quickly each year. But maintain flexibility – if an initiative is wildly successful, you may want to allocate more funds towards it.

Define Your Media Mix

Your advertising budget should be allocated across different media types and platforms. This is referred to as your media mix. 

Consider the following when determining your ideal mix:

– Each channel’s effectiveness in meeting your campaign goals

– Your target audience’s media preferences and habits

– Current ad rates as previously researched

– Resources required to manage campaigns across different platforms

A common best practice is allocating about 70% of your budget to proven lead-generating channels like search ads and email marketing, with about 30% reserved for brand building through channels like social media and TV. Test to find your optimum mix.

Set Per-Campaign Budgets

In addition to defining budget allocations by media type, you should designate specific budgets for each ad campaign and initiative you’ll run. 

For example, you may devote $10,000 of your monthly search budget towards a campaign targeting your top product keywords. Or you may allocate $15,000 of your display budget towards a retargeting campaign for site visitors.

Track the performance of each campaign separately to see where budget increases or decreases may be required next month. Use campaign-specific budgets to target your best-performing initiatives.

Monitor Campaign Performance

Once your campaigns launch, implement strong reporting to monitor performance against your Key Performance Indicators (KPIs). Set up automatic campaign tracking within each ad platform as well as analytics integration across your website, conversion paths, CRM, and other touchpoints.

Regularly review metrics like impressions, clicks, conversions, ROI, and cost per conversion to assess how well your budgets are spent. Identify low-performing areas where budgets can be reduced, as well as high-performing campaigns where more funding may improve results.

A data-driven approach allows you to optimise your budget allocations month over month and achieve the maximum impact for your spend.

Align with Sales Cycles

Factor your sales cycle into budget planning, ramping up ad spend to drive bottom-of-the-funnel conversions when sales teams need it most. 

For example, if your sales reps make calls at the start of each month to discuss needs and send proposals, increase conversion-focused ads in the last two weeks of each month to develop qualified leads.

Coordinate with sales and listen to feedback on the quality and quantity of leads required to hit targets. Adapt your advertising budget and media mix accordingly.

Account for Emergencies 

No matter how thoroughly you plan your advertising budget, unexpected events can impact your business. Prepare for emergencies by building in a 5-10% contingency room within your overall budget. 

If a downturn or crisis necessitates cutting back on advertising, these reserve funds enable you to scale down budgets smoothly vs making drastic cuts. They also provide a budget to quickly increase spending to take advantage of significant opportunities or changes in the competitive landscape.

A contingency plan makes your annual budget more adaptable and resilient to unexpected events beyond your control.  

Develop an ROI-Focused Mindset

To maximise advertising results, adopt an ROI-driven mindset where you interpret budgets in terms of potential profit, not just cost. Tracking ROI demonstrates the revenue generated as a direct result of your advertising investment. 

Make decisions based on ROI data – scale budgets up for campaigns with higher returns and vice versa. This focus helps ensure no dollars go to waste.

Use benchmarks like your CPA (cost per acquisition) goals to determine acceptable ROI thresholds. If a campaign’s CPA exceeds your maximum target, reallocate that budget to initiatives with higher return potential.

Invest at the Right Scale 

To succeed with advertising, you must play at the appropriate scale for your industry. The minimum spend needed to drive results varies greatly. 

A new social media ad campaign may require an initial budget of $5,000+ for adequate scale, while an SEM campaign often needs $15,000+ monthly to cover key keywords with quality score. 

With traditional formats like billboards and TV, required spends soar even higher due to production costs and media rates.

Research typical spend levels in your industry and aim to match or exceed that level so your budget can effectively achieve its objectives. Too small a budget can prevent your ads from reaching and engaging your audience.

Keep Optimising & Improving

Advertising budgeting is an ongoing, evolving process. Assess what’s working and refine your allocation and mix every month. Take advantage of optimization tools within ad platforms. Continue educating yourself on emerging formats and best practices.

Experiment with new channels and initiatives on a small scale first before allocating more budget. Stay on top of changes with ad rates, economic factors influencing your industry, competitor actions, and other market dynamics.  

With regular review and optimization, your advertising budget will continue driving better results over time and fueling a positive ROI on your marketing investment.

Key Takeaways

– Establish concrete marketing objectives to inform your budget numbers.

– Thoroughly research ad rates and competitor spend levels to benchmark. 

– Factor in seasonality and sales cycles when planning budgets.

– Allocate budget by media mix, campaigns, and monthly vs. yearly. 

– Closely monitor performance using KPIs like ROI and CPA.

– Continuously optimise based on data-driven insights.

Focusing on these keys allows you to build an effective, optimised advertising budget positioned to help you achieve your marketing and business goals. With the right budget in place, you can reach new heights of success and growth.