5 Steps for Setting an Advertising Budget

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Hey small business owners! You’ve just started your business and are looking for new clients to grow your profits. The key to expanding your business and increasing exposure is advertising and marketing. Unfortunately marketing can present many challenges, including small business advertising costs. Luckily you’ve come to the right place! Read below for some great tips on creating an advertising budget for small businesses.



1) Review Competitor Advertising

The first step in creating a budget of advertising is to analyze how your competition spends their advertising money. Keeping track of the competition will allow you to recognize new trends, predict shifts in the market, and understand your own business’ strengths and weaknesses. This strategy will keep you one step ahead of the competition and help you see where your business can improve. Examine what methods your competition uses for advertising. See if they use print, radio, internet, or direct mail, and then determine how much money they are spending. This will help you gauge how much you need to allocate to your own advertising budget plan.

You can start this process by doing some basic research. Identify your competitors, scroll through their websites, and even go to their store if they have one. The major elements you’ll want to get an understanding of are:

  • Who are your competitors’ customers?
  • What is their unique selling point?
  • Where and how are they advertising?
  • How do their rates compare to yours?
  • What is their marketing strategy (discounts, promotions)?

Begin by finding 3-4 competitors that you want to study and then start collecting information through research. The best practice to identify your competitor’s marketing strategy is by pretending to be one of their customers. Really try to put yourself in the shoes of your potential clients. You can do this by perusing their website, subscribing to their blog, and going to their store if they have one. 

2) Establish a Fixed-Price Advertising Budget


When considering your advertising it is important to set a constant budget that you will adhere to throughout your marketing plan. Many companies do this by setting aside a fixed portion of their sales revenue strictly for the purpose of advertising. The percentage that you choose will depend on what industry your company rests in and what your competitors have chosen to do themselves. You must consider how much you are capable of spending for your small business advertising costs and how much you must invest to yield positive results. 

3) Designate a Maximum for Advertising Costs

Once you know how much money you have available for your advertising costs and how much you need to spend on each channel, it is critical you establish a maximum amount to spend on marketing. After the budget is set you must adhere to it strictly. Be sure not to exceed the maximum amount of money allocated to your budget of advertising. Doing so may stretch your business too thin and destabilize your company forcing you into debt or even worse. Also, once you’ve established this maximum you can divide it accordingly based on your advertising goals.

4) Set Tangible Goals

Once you’ve created your advertising budget plan and understand your place in the market as well as who your competitors are, move to establishing clear goals and objectives. Your decisions moving forward should all be geared toward achieving them. These goals should be simple and tangible so that you can easily track your progress toward them. For example, a goal could be increasing your online by 10%. To execute this you’ll have to figure out how much revenue those new customers will be and how much money you’ll have to spend to locate and market for these future consumers. The acronym SMART is a quality template to keep in mind when attempting to define these goals. 

Smart: write out clear goals 

Measurable: track your progress

Attainable: challenging yet realistic goals 

Relevant: relate to the overall goal you are trying to achieve 

Timely: have a time frame

5) Measure Results

Your marketing plan and advertising budget will not be complete until you have a clear method of tracking and measuring your results. This part of the plan lets the advertising team know if their work has been successful. It allows you and your company to identify what has been working and how you may need to adapt in the future. If your business is not meeting its goals, you will recognize it and be able to modify and optimize your advertising strategy to yield better results. Key performance indicators (KPIs) are a great way to monitor your advertising success. It is a quantifiable value that reveals whether or not you’ve achieved your objectives. Ultimately a method of measuring your marketing strategy is crucial to assessing the success of your plan and ensuring that it is constantly adapting to keep up with competitors and maximize your business. 

That’s all for now. Thank you for reading! If there’s anything else when it comes to setting up an advertising budget please let us know in the comments. And be sure to follow us on Facebook and Instagram @agraba.io for more marketing tips and blog posts!