Tips on How Much to Spend on Advertising

All business owners know that it is necessary to advertise their products or services in order to attract new customers. Figuring out exactly how much you should be spending on your marketing efforts, however, is surprisingly difficult. Some people, including the US Small Business Administration, recommend a rule of thumb of 7-8% of your sales if your total revenue is under 5 million annually. While this is a good number to get you started, every business is unique and will require something a little different.

The following simple tips can help you to think about how you want to advertise your business and how much you should be spending. Read through them and see which ones will apply best to your situation. Once done, you should be able to better determine what your advertising costs should be.

Determine Cost-Per-Acquisition

The first thing you need to do is try to figure out exactly what your cost-per-acquisition (or cost per sale) is going to be. If you have to spend $10 to bring in a customer for one sale, for example, then you will know how much you need to spend on advertising to bring in the number of sales your business needs. While it may seem confusing at first, there are ways to properly determine these numbers. If you’re not sure what yours are, you may want to speak with an advertising partner or accountant to figure it out.

Speed of Sales from Advertising

Looking at how quickly new sales or customers come to you after you run an ad campaign is also important. Some ad campaigns will immediately send a surge of new customers, but then trail off quickly. Others offer a stable increase in the total number of customers. Knowing how and when your advertising will impact your sales is very important. You don’t want to run too many ads so that you get more customers than you can properly serve.

Cost of Ad Types

Taking some time to learn how much each type of ad will cost your business is essential. Once you know how much options such ad digital ads, billboards, televisions ads, radio spots and others will cost, you can begin to figure how much of each one you want to spend. Having a diverse advertising campaign can help you to build steady growth for your business. Spending money in the right places is very important.

Always be Testing

One of the most important things you can do is make sure you set aside a small amount of your total ad budget for testing new things. Even if it is just a few percentage of the total, it can prove to be the best investment possible. Constantly testing new marketing strategies can help you to find what works best. It can also help you to discover what doesn’t work well without you wasting too much time or too much of your money. Just keep working on improving your results and you’ll find you always have plenty of money for advertising.

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