Introduction
One of the biggest questions in digital marketing is, “How much should I spend on ads?” The truth is, there’s no fixed answer because it depends on several factors like your business goals, industry, and audience. However, there are strategies to help you determine the right budget and maximize your return on investment.
In this guide, I’ll break down how to calculate your ad budget, the key factors that influence costs, and how to get the best results from your campaigns.
1. Understanding How Ad Budgets Work
Your ad budget should align with your business goals. If your goal is to build brand awareness, you might spend less than if you were focused on getting direct sales. Here are a few key factors that affect ad costs:
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Your industry – Some industries, like finance and real estate, have higher advertising costs than others.
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Your audience size – A larger audience costs less per click but may not convert as well as a smaller, more targeted audience.
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Your chosen platform – Facebook, Instagram, Google, and TikTok all have different cost structures.
2. The 70-20-10 Rule for Ad Budgets
A good way to structure your budget is by using the 70-20-10 rule:
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Spend 70 percent of your budget on proven ad campaigns that are already performing well.
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Use 20 percent to test new audiences, creatives, and strategies.
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Set aside 10 percent to try new advertising platforms or innovative ideas.
This method ensures that most of your budget is being used efficiently while still allowing room for experimentation.
3. How to Calculate Your Ad Budget
A simple way to determine your budget is by working backward from your revenue goals.
Let’s say you want to make $10,000 in revenue this month.
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If your product sells for $100, you need to make 100 sales to reach your goal.
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If your website has a 2 percent conversion rate, that means for every 100 visitors, only two will buy.
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To get 100 sales, you need 5,000 visitors.
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If your average cost per click (CPC) is $1, you’ll need to spend $5,000 on ads to get those 5,000 visitors.
This means that, based on these numbers, you should set an ad budget of $5,000 to achieve your $10,000 revenue goal. If your conversion rate is higher or your CPC is lower, you might need to spend less.
4. Recommended Minimum Ad Budgets
If you’re just starting and don’t know how much to spend, here’s a rough estimate based on different goals:
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Brand awareness – $5 to $20 per day
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Lead generation – $20 to $50 per day
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Sales and conversions – $50 to $100 per day, depending on your product price
If you have a limited budget, you can start with as little as $10 per day and scale up once you see what’s working.
5. How to Optimize Your Ad Budget for Better Results
Spending more money on ads doesn’t automatically mean better results. You need to optimize your budget so you get the best return. Here are a few ways to do that:
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Start with a small test budget and increase spending on the best-performing ads.
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Focus on high-intent audiences, like people who have already visited your website.
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Track your cost per result and adjust your budget based on performance.
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Make sure your landing page is optimized so that you’re not wasting money sending traffic to a page that doesn’t convert.
Final Thoughts
Ad budgeting isn’t about spending the most money—it’s about spending it wisely. By setting clear goals, understanding your costs, and optimizing your campaigns, you can get the best possible results.
Need Help with Your Ads?
If you want to run profitable ad campaigns without wasting money, let’s work together. Contact us today, and we will help you create an ad strategy that works.
