Ways to set an advertising budget
- Percentage of revenue: a share of current or expected sales. Simple, but it ties spending to past results rather than opportunity.
- Objective and task: work out what you want to achieve, such as 40 new customers, and what it costs to get there.
- Competitive parity: spend roughly what competitors spend, to keep your share of voice.
- What you can afford: common for small businesses, but it risks spending too little to see results.
Working backwards from your numbers
For performance advertising, start from the economics. If a customer brings 10,000 kr in profit and you are willing to spend 2,500 kr to win one, and your campaigns turn about 5% of clicks into leads and 20% of leads into customers, then one in a hundred clicks becomes a customer and a click is worth at most 25 kr. That tells you which keywords and channels can pay off.
Managing the budget
- Start with a test budget large enough to give meaningful data.
- Move money towards the campaigns with the best cost per acquisition or return on ad spend.
- Keep part of the budget for testing new channels and messages.
- Include the costs of creative, tools and management, not just ad spend.
Estimate what a budget could bring with our free Ads ROI calculator.
Advertising budget example
A small online shop makes 20,000 kr a month in sales and decides to spend 10% on ads: 2,000 kr. It splits the money as 1,200 kr on Google Shopping, 500 kr on Instagram and 300 kr on email tools, checks cost per sale after four weeks and moves money to the channel that is cheapest per sale. This is a simple starting plan, not a rule for every business.
How to build an advertising budget in five steps
- Set the goal in numbers, such as 30 new customers a month.
- Work out the maximum you can spend to win one customer, from profit per customer.
- List the channels that fit your customers and their rough costs per click or lead.
- Split the budget, keeping a share for testing.
- Review weekly and adjust monthly.
Advertising budget mistakes
- Spending too little to gather enough data for decisions.
- Putting all the money in one channel.
- Cutting the budget when sales are slow, which can make things worse.
- Not counting creative, tools and agency fees in the total.
Advertising budget FAQs
How much should a small business spend on advertising?
It depends on margins, goals and how fast you want to grow. Many businesses start with a share of revenue and then adjust based on results. Try our advertising ROI calculator.
How do I know if my budget works?
Track cost per acquisition and return on ad spend against your profit per customer.